Services sector 'has a spring in its step'

5 March 2013

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5 March 2013 | Adam Leach

Buyers in the UK services sector experienced the sharpest rise in input costs for 14 months in February as the industry’s expansion continued.

The latest Markit/CIPS UK Services Purchasing Managers’ Index, published today, revealed activity in the sector expanded for the second consecutive month. The sector posted a score of 51.8 for the month, indicating that activity increased at a slightly faster rate than in January.

A more positive outlook backed the heightened activity across the sector as business confidence hit a nine-month high.

However, margins in the sector were squeezed as input costs rose at their quickest for 14 months, with high fuel prices identified by many as a significant factor. In response to this added pricing pressure, the sector increased output charges. Employment also increased as firms hired staff to enable them to deal with the increased demand; this higher output resulted in backlogs of work continuing to decline.

David Noble, CEO at CIPS, said: “The services sector has a spring in its step having posted its best performance in five months. There are reasons for this optimism across the board, as a surge in new business bolstered by stronger client demand, have encouraged businesses to take on more staff. All of this has fostered a welcome return to confidence – the strongest for nine months. Increased costs, driven by macro-economic factors and causing firms to push up their prices marginally, were the exception to an otherwise positive February.”

Chris Williamson, chief economist at Markit, said: “Faster growth of the dominant services sector offset downturns in manufacturing and construction during February, meaning the economy is likely to have grown for a second successive month after the downturn late last year.”

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