UK services sector growth slows to two-and-a-half year low

Will Green is news editor of Supply Management
5 October 2015

Growth in the UK services sector slumped to the slowest in almost two-and-a-half years in September, according to a survey of buyers.

The Markit/CIPS UK Services Purchasing Managers’ Index fell to 53.3 in September, down on 55.6 in August and against the reading of 50 which indicates no change.

The rate of expansion in new business slowed for the fifth time in six months, while the overall pace of growth was the slowest since April 2013.

New business intakes were sufficient to generate a further increase in the level of outstanding business and the rate of job creation was the strongest since June.

Inflationary pressures remained weak in September, with average input prices rising only slightly faster than August’s seven-month low, while charges rose only marginally.

David Noble, group CEO, CIPS, said: “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.”

Chris Williamson, chief economist at Markit, said: “Weakness is spreading from the struggling manufacturing sector, hitting transport and other industrial-related services in particular. There are also signs that consumers have become more cautious and are pulling back on their leisure spending, such as on restaurants and hotels. Wider business service sector confidence has meanwhile also been knocked by global economic worries and financial market jitters.

“At the moment, sustained strong hiring in services and construction suggests that companies are generally expecting the slowdown to be short-lived. But with the three PMI surveys collectively recording the weakest inflows of new business for two-and-a-half years, there’s a strong likelihood that the slowdown could intensify in coming months.”

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