Services growth at four-month high

Will Green is news editor of Supply Management
5 March 2018

Growth in UK services hit a four-month high in February, driven mainly by business-to-business orders.

Firms reported that stretched household budgets remained a factor in holding back domestic consumer demand but business-to-business sales were particularly marked, with growth in new orders the strongest since May 2017.

The IHS Markit/CIPS UK Services Purchasing Managers’ Index rose to 54.5 in February, up on 53 in January and against the no-change reading of 50.

Input cost inflation eased to the lowest since August 2016, which some linked to a stabilisation in exchange rate driven pressures. In turn, prices charged increased at the weakest rate for six months. Respondents commented on efforts to stimulate demand through competitive pricing and promotional activities.

Duncan Brock, director of customer relationships at CIPS, said: “A complex array of forces were at play in the UK services sector last month resulting in the fastest rise in new orders since May 2017 but also hindered by continued consumer caution over spending.

“In fact it was business customers that had the confidence to forge ahead with orders, as consumers hesitated over concerns about possible rate rises impacting on their household budgets and what the future could hold.”

Chris Williamson, chief business economist at IHS Markit, said: “With Bank of England policymakers sounding hawkish even following the January fall in the PMI to a one-and-a-half year low, the February upturn in the surveys surely leaves a May rate hike very much in play. The bank seems keen to normalise interest rates even if output growth is below levels it would usually like to see when tightening policy.”

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