Service sector slows

CIPS 5 May 2011

UK service sector unexpected slowdown in april

Ongoing cost pressures led to accelerated rise in output charges, leading Markit/CIPS Purchasing Managers’ Index® (PMI®)  to drop 3 points to 54.3.

Business confidence is at the lowest of 2011 so far and there are reports of a marginal fall in employment. However sales rose to greatest extent since March 2010.

David Noble, CEO of CIPS, said, “The UK Services sector seems to have taken a slight breather in April between the rebound experienced in Q1 and the prospect of more sustained growth in the coming months.  The biggest growth in new orders for 13 months provides cause for some optimism.

“Whilst there are signs that government spending cuts have knocked business confidence and that overcapacity has led to a reversal of the employment growth seen in March, there were noticeable differences between services sub-sectors.  On the positive side, investment in IT & Computing services, traditionally an indicator of expected future growth opportunities, appeared to be spreading - registering the strongest growth in new business and higher demand for new staff.
“The main source of anxiety is likely to be the sharpest output price inflation for two and a half years.  This is an inevitable symptom of rising input costs and decreasing profitability over the past few months, and will start to cause concern if not reined in.”

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