Services PMI continues to grow but at a slower rate

CIPS 28 May 2010

Latest PMI for services shows possible temporary blip in recovery

Purchasing managers reported a slowing in growth in the sector for services, though activity and new business continued to grow in April.

Temporary factors such as the volcanic ash affecting the Transport, Storage and Communications sector were one of the factors to blame, but employment went up across the sector. The reading was reported at 55.3, down from March's 56.5.

David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, said:

“A slowdown in services sector growth shows that it wasn’t just planes that were grounded by the volcanic ash in April. Business operations and supply-chains were heavily impacted by the shutdown of air travel which led to a marked drop in growth. However, just like the impact of the heavy snow in January, this is only likely to be a temporary blip and it is very encouraging to see the sector has grown so strongly this year despite these setbacks as well as the uncertainty surrounding the election.

“We are finally starting to see a real turnaround in employment levels with the number of jobs growing at the strongest pace in over two years. This is hugely encouraging as an economic recovery without job growth is like a having a party with no guests invited.
“One note of caution must be the inflation that seems to be lurking within the services sector. Input costs continue to rise for services businesses but intense competition for customers means they are still unable to pass these costs on. This situation cannot last forever and we will soon reach a tipping point where profit margins can no longer be squeezed and output prices have to rise.

“It seems that accessing credit is still a big issue for many companies and could explain why we’re seeing larger companies outperform smaller sized enterprises.  This is a particularly pressing issue given that SMEs account for roughly 99% of UK businesses. Whatever party wins the election, this should definitely be a priority area if we want to see a more even spread of economic growth across all business sizes.”

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

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