Services sector grows at slowest rate for nine months

Will Green is news editor of Supply Management
3 April 2014

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3 April 2014 | Will Green

Growth in the UK services sector rose at its slowest rate for nine months in March, according to a survey of buyers.

The Markit/CIPS Purchasing Managers’ Index registered 57.6 in March, well above the 50 no-change mark, but at the lowest level since June 2013.

The survey also showed incoming new business volumes rose, but at the slowest pace for 10 months, while around 16 per cent of respondents reported an increase in backlogs.

In response to backlogs companies have added to staffing levels, with a net increase recorded for the 15th month in a row.

Input price inflation was at its weakest since May 2013, and although suppliers were reportedly taking advantage of stronger demand to raise prices and wage costs were increasing, panellists said improved efficiency was keeping rising costs in check. As a result, output charges rose only marginally, with strong competition reportedly weighing on pricing power, and lower cost inflation reducing the need to raise charges.

Business confidence, despite easing to a four-month low, remained firm, with half of the survey panel expecting activity to increase in the coming year.

Chris Williamson, chief economist at Markit, said: “With prices charged for services barely rising, and the exchange rate reducing the cost of imports, inflation is set to fall further in the coming months, extending this Goldilocks period of above-trend growth and falling inflation.

“Policymakers will be concerned that growth could ease further if sterling continues to appreciate, but there's no evidence to suggest that any slowdown will be anything other than modest, adding to indications that the UK is set to see growth outpace its peers in 2014.”

CIPS group CEO David Noble said: “Capacity has been an issue with backlogs of work continuing to expand. This, alongside a solid pipeline of new business and a positive economic climate, continued to drive strong job creation for a 15th consecutive month – all good leading indicators of a more positive period ahead.”


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