UK services sector grows slowly

5 November 2012

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5 November 2012 | Adam Leach

Companies in the UK services sector reported activity grew last month, however, but more slowly compared with the month before.

The Markit CIPS UK Services PMI for October recorded a figure of 50.6, where a figure above 50 indicates growth. While the finding indicates a strengthening in the sector, the rate of increase slowed compared with September which recorded a figure of 52.2.

Respondents linked the growth to an improvement in both demand for services and client confidence, with a portion identifying export growth as one of the key drivers. Despite this, new incoming orders were insufficient in number to outweigh the amount of completed jobs, resulting in a drop in outstanding work.

Input costs across the sector rose, but output costs rose only marginally as companies were unwilling to fully pass the increase onto clients. Employment in the sector dropped for the second consecutive month, though at a reduced rate compared with September.

David Noble, CEO at CIPS, said: “Whilst the services sector can point to continued growth, it is at its weakest in just under two years, prolonging the sense of economic stasis which currently grips the industry. There are pockets of positivity; reports of growth in export markets are a welcome reprieve for a sector low on confidence and new business remains solid if not spectacular.”

Andrew Harker, economist at Markit, said: “Although there are signs of improvements, panellists still referred to the fragility of both demand and confidence among clients. Competitive pressures were also highlighted, both by respondents and by the slight nature of output price inflation.”

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