CIPS News


Weakest rise in activity in nearly two-and-a-half years in September

CIPS 5 October 2015

Markit/CIPS UK Services PMI®

Markit/CIPS UK Services PMI®

Key Points

  • September completes weakest quarter since Q2 2013
  • New business growth hits 29-month low
  • Charges continue to rise only marginally 

The dominant UK services sector continued to experience a slowing rate of growth at the end of the third quarter, according to the latest PMI® survey data from Markit and CIPS. Total business activity rose at the slowest pace since April 2013, as did the volume of incoming new work. Outstanding business rose only fractionally as a result, while the longer-term outlook sank to the weakest since August 2014. Input prices rose solidly, linked to salary pressures, but charges levied by service providers increased only marginally. The main positive from the latest survey was the strongest rise in employment in three months. 

The headline figure for the survey is the seasonally adjusted Markit/CIPS UK Services Business Activity Index, a single-figure measure designed to track changes in total UK services activity compared with one month previously. Readings above 50.0 signal growth of activity compared with the previous month, and below 50.0 contraction.

The Business Activity Index remained above 50.0 in September, signalling a continuation of the current spell of rising services output that began in January 2013. The headline figure fell for the third month in succession, however, to 53.3, from August’s 55.6, indicating the weakest rate of growth since April 2013. Correspondingly, the average reading for the Index over the third quarter as a whole (55.4) was the weakest since the second quarter of 2013. 

The rate of expansion in new business slowed for the fifth time in six months in September. The overall pace of growth was the slowest since April 2013, but nonetheless in line with the average since the survey began in July 1996.

Some firms reported hesitation among clients in placing new contracts, linked to global economic uncertainty. The forward-looking indicator for business expectations fell to a 13-month low in September, but still signalled solid overall growth.

New business intakes were sufficiently solid to generate a further increase in the level of outstanding business in September. Backlogs have risen continuously over the past two-and-a-half years with the exception of a marginal decline in June. That said, the latest increase was only slight. In contrast to the trends seen for activity and new business, employment at service providers rose at a stronger rate in September. The rate of job creation was the strongest since June, and took the current sequence of increases to 33 months.

Inflationary pressures remained relatively weak in September. Average input prices rose at a slightly faster pace than August’s seven-month low, linked to salaries, but one that remained weak in the context of historic survey data. Charges levied by service providers continued to rise only marginally.

David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply: 

“The further softening of growth in the services sector must now be causing some concern for the sustainability of the recent recovery in the UK economy. 

“Respondents pointed to reluctance from clients in placing contracts, and their faith in business buffeted by a global economy suffering from sluggish activity. It appears that when China sneezes, the world catches a cold as some companies cited the region as a cause for worldwide concern.

“Employment levels were the only bright spot, showing a strong rise and at the most robust rate since June, though firms also reported an impact on costs with higher wages and concerns about the effects of the Living Wage.

“Almost half of procurement managers retained an upbeat view of business expectations, but overall sentiment was the weakest in 13 months. Business activity growth slowing to a 29-month low is not the best news from the sector.” 

Ends 

Page Loading
Page Loading