Services sector confidence at 'four-and-a-half year high'

Will Green is news editor of Supply Management
5 March 2014

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5 March 2014 | Will Green

Business confidence in the services sector reached a four-and-a-half year high in February.

The Markit/CIPS UK Services Purchasing Managers’ Index recorded 58.2 in February, the lowest reading since June 2013 but still indicative of strong growth against a baseline of 50, which indicates no change.

Despite reports that the adverse weather had disrupted activity in parts of the country, others reported that the mild winter had been a spur to business.

Expansion has now been recorded for 14 months and capacity remains under pressure, with the increase in backlogs only slightly down on January’s near 17-year peak.

As a result almost a fifth of panellists reported a rise in staffing levels – the sharpest increase since October 2013 – and confidence levels improved for the fourth successive month to their highest level since September 2009.

Input price pressures were “relatively contained” during February, with inflation the lowest for six months, and panellists reported “successful negotiations with vendors”. Where costs rose this was blamed on fuel, utility and wage bills.

Chris Williamson, chief economist at Markit, said: “The services economy notched up yet another month of robust growth in February, a performance that is all the more remarkable given the weather-related disruptions that have hit many businesses.

“Alongside vibrant growth in manufacturing and construction, the upbeat picture of the services economy points to the country enjoying another quarter of robust economic growth of approximately 0.7 per cent.”

CIPS group CEO David Noble said: “The UK services sector maintained the lengthening trend of consistent growth and all the signs are this is set to continue, with confidence at a four-and-a-half year high. The rising new business, on top of existing backlogs, does mean capacity continues to be tested.”

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