Confidence 'disappears' from services sector

Will Green is news editor of Supply Management
5 March 2019

Growth in UK services rose in February but staffing levels dropped to the greatest extent in more than seven years, according to the latest PMI.

The IHS Markit/CIPS UK Services Purchasing Managers’ Index climbed to 51.3 in February, up on January’s two-and-a-half year low of 50.1 and against the no-change reading of 50.

A lack of new work, linked to Brexit, to replace completed projects led to more cautious hiring, with the decline in employment numbers the fastest recorded since November 2011.

Survey respondents noted that higher fuel, energy and staff costs underpinned a sharp rise in operating costs, though the overall rate of input price inflation eased to a nine-month low.

Softer cost pressures, intense competition and efforts to stimulate sales led to the slowest rise in average prices charged by service providers since September 2018.

Duncan Brock, group director at CIPS, said: “Consumer and client confidence disappeared from the sector, as the hesitancy to place orders also rippled out from Europe. Survey respondents said anxious international clients cancelled contracts and delayed decisions. Latest data pointed to the sixth straight monthly drop in export orders. Notwithstanding a notable re-acceleration in services output in March, the first quarter of 2019 is set to be a disappointment.”

Chris Williamson, chief business economist at IHS Markit, said: “The latest PMI surveys indicate that the UK economy remained close to stagnation in February, despite a flurry of activity in many sectors ahead of the UK’s scheduled departure from the EU. The data suggest the economy is on course to grow by just 0.1% in the first quarter.”

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