Services sector growth slows to 19-month low

Will Green is news editor of Supply Management
6 January 2015

Growth in the UK services sector was at its slowest for more than a year-and-a-half in December, according to a survey of buyers.

The Markit/CIPS UK Services Purchasing Managers’ Index recorded 55.8 in December, down from 58.6 in the month before and the lowest for 19 months, but still above 50, which indicates no change.

The slowdown came against a background of reports of lower enquiry levels compared to earlier in the year, though more than 46 per cent of panellists expected an improvement in activity levels over the coming year.

Backlogs of work rose for the 21st month in a row and insufficient staff numbers were reported to be a factor.

Reduced fuel prices restricted total operating cost inflation at a level well below the historical trend, and where increased costs were reported, this was linked to rising salaries, especially for new recruits.

A number of firm sought to pass on input costs to clients through a rise in output charges, but competitive pressures restricted the rate of inflation.

David Noble, group CEO, CIPS, said: “The latest overall figure is the lowest for 19 months, but volumes of new business continue to rise above the long-term average even though the pace has slowed, inevitably causing slight concern.

“However, as companies have been confident enough to invest and conduct additional marketing activity, procurement and supply management professionals demonstrate that the marketplace is still healthy and offers more opportunity for growth in the coming months.”

Chris Williamson, chief economist at Markit, said: “It’s too early to get worried about a sharp slowdown; after all, the latest PMI reading is still strong, merely down from unusually high levels earlier in the year and in line with the average seen in the years leading up to the financial crisis.

“Importantly, the pace of growth remains robust enough to sustain an impressive rate of job creation, with the survey also finding welcome evidence of increased wage growth.”

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