March sees further boost in UK services sector

Rebecca Ellinor Tyler is former editor of Supply Management
7 April 2015

Service providers in the UK reported a stronger increase in business activity in March, the latest PMI survey data from Markit and CIPS has found.

The seasonally adjusted Markit/CIPS UK Services Business Activity Index, came in at 58.9 for March, well above the no-change mark of 50. The measure tracks changes in total UK services activity compared with the previous month and showed a stronger performance than the 56.7 recorded in February.

The rate of expansion for March accelerated to a seven-month high, driven by a stronger rise in new business. The volume of outstanding business also rose at a faster rate. Price pressures remained subdued, with input price inflation unchanged from February and prices charged by service sector companies barely rising in March.

Growth in activity was attributed to a wider economic recovery, improving confidence, winning new customers and new product development.

David Noble, group CEO, CIPS said: “A flood of confidence emanated this month as business optimism and activity remained high.

“Though the rate of increase in levels of employment was not as high as at the beginning of the year, the continuous 27-month rise in employment opportunities will please job seekers. Skills shortages, however, were still in evidence and the demand for higher salaries from skilled staff impacted on input costs for businesses.

“They were also subjected to higher charges levied by suppliers where previously they had enjoyed respite with lower energy prices contributing to lower overall costs. However, suppliers themselves were under increased pressure as both a rise in new business and the demands of outstanding work weighed heavily on capacity and fulfilment.”

He said today’s PMI combined with the rise in activity in the construction and manufacturing sector, all pointed to a healthier UK economy overall.

Markit chief economist Chris Williamson, said: “The three PMI surveys collectively indicate that the economy grew by 0.7 per cent in the first quarter, reviving from the slowdown seen late last year.

“The data shows employment growth remaining close to record highs and few signs of inflation picking up from its all-time low. The combination of fuller employment and falling prices should support economic growth by providing an important catalyst to higher consumer spending, on which the upturn appears to have become increasingly dependent in recent months.

“While the data supports the view that the next move interest rates will be upward, the lack of inflationary pressures suggests the first hike remains some way off, and probably not this year unless we see some significant upturn in wage growth.”

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