Public sector cuts affect services sector

CIPS 5 August 2010

PMI for services shows concerns over the impact of public sector cuts

The services sector showed little optimism in July, as the Markit/CIPS Purchasing Managers’ Index® (PMI®) fell.

Growth was weakened as public sector demand tailed off and though confidence was steady, it was well-below the long-run average. Reports of activity and new orders showed a slowdown as the rport posted 53.1, from June's 54.4.

David Noble, CEO of CIPS said: "This month's services PMIs will undoubtedly raise questions about whether the economic recovery is running out of steam. To see government spending cuts impact the sector so quickly is a concern given the bulk of cuts are still yet to come. The big question is whether the private sector can plug the big gaps left by the public purse.

"The fall in employment is particularly disappointing and shows how quickly businnesses will respond to worsening economic conditions - let's hope this isn't a trend we'll see continue.

" It's clear the economy is in for a bumpy ride over the next few months and we still remain optimistic that we will see a period of low growth rather than a double-dip recession. Looking forward, the focus will be on what further impact the impending Spending Review and VAT rises will have. As the services sector accounts for approximately 40% of the Uk economy, it will play a pivotal role in helping bolster the UK's wider health."

For press enquiries, call the Press office on 01780 756777 or email: The PMI data is available to purchase

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