Subdued growth in UK services sector

Paul Snell is managing editor at Supply Management
4 November 2015

The UK services sector grew more quickly in October, although activity remained close to the two-and-a-half year low seen in the previous month.

The Markit/CIPS UK Services Purchasing Managers’ Index (PMI) recorded a figure of 54.9 last month, the first quickening of pace since June. A reading on the index above 50 indicates expansion in the sector. The index was at 53.3 in September.

New business expanded for the 34th month in a row but the pace of growth was at the same rate as the previous month, which was a 29th month low. Successful marketing, orders from new and existing customers and improved confidence were highlighted as reasons for the expansion.

But there was positive news for purchasers as input price inflation was at the joint-second lowest rate since September 2009.

David Noble, group CEO, CIPS said: “The rate of staffing growth rose to a five-month high and was faster than the average over the 19-year survey history. Respondents cited some difficulty in finding skilled staff so were willing to offer higher salaries to good candidates. The requirements of the living wage also contributed to higher input charges while material prices remained subdued.

“Backlogs rose slightly although growth of new business was disappointing and dampened future business sentiment, which was the weakest for two-and-a-half years and fell for the fifth consecutive month. Government spending reviews and this mixed picture of highs and lows makes it difficult to predict whether a searing rise in economic improvement is likely.”

Chris Williamson, chief economist at Markit, said: "The PMI surveys brought welcome news of faster economic growth at the start of the fourth quarter. The three surveys collectively indicated that the rate of economic growth rebounded in October from the two-and-a-half year low seen at the end of the third quarter. A faster rate of expansion in service sector activity accompanied the steep upturn in manufacturing growth and robust construction sector growth reported earlier in the week."

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