Services sector gets 'January blues'

Will Green is news editor of Supply Management
5 February 2019

Growth in UK services dropped to a two-and-a-half year low in January, according to the latest PMI.

The IHS Markit/CIPS UK Services Purchasing Managers’ Index fell to 50.1 in January, down on 51.2 in December and close to the 50 no-change reading. Below 50 indicates contraction.

Survey respondents overwhelmingly linked the slowdown to heightened political uncertainty related to Brexit.

For the first time since July 2016 a decline in incoming new work was reported, though the fall was modest.

Firms cited higher salary payments as a key factor driving up input costs, along with exchange rate depreciation. Intense competition for work contributed to the slowest increase in average prices charged by firms since September 2018.

Duncan Brock, group director at CIPS, said: “The sector had the January blues last month, as employment dropped for the first time in over six years, and new order levels fell into contraction territory.

“At the risk of sounding like a broken record, Brexit uncertainty continues to be at the heart of the malaise as clients delayed orders and consumers were deeply reluctant to spend under the continuing cloud of hesitation, indecision and ambiguity.”

Chris Williamson, chief business economist at IHS Markit, said: “Service sector growth ground almost to a halt in January, matching similar disappointing news in the manufacturing and construction sectors.

“The last three months have seen the economy slip into its weakest growth spell for six years, and indicate that GDP likely stagnated at the start of 2019 after eking out modest growth of just 0.1% in the fourth quarter.”

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