Partner Article

UK service sector shows buoyancy

UK service sector companies reported “surprisingly buoyant” business conditions in December, according to the latest purchasing managers index (PMI).

Activity and new work both increased at the fastest rates since July, providing a positive close to the year.

The Business Activity Index showed a five-month high of 54.0 in December, up from 52.1 in November; figures over 50 indicate growth.

Many respondents showed caution however, as business expectations matched September’s two-and-a-half year low.

David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply:
“December capped a year of reasonable growth for the UK service sector but significant risks still lurk under the surface, not least the outcome of ongoing efforts to shore up Eurozone economies.

“Companies exposed to the poorer performing manufacturing and construction industries in
particular will need to watch out for the impact of these dangers.

“Selecting a winning pricing strategy will be the name of the game for many in the coming months, as the majority continue to grapple with higher cost inflation.

“Many businesses are already sacrificing profits and working harder to get the edge over their competitors. Some purchasing managers reported suppliers increasing prices and caution among customers, adding to the squeeze.”

Chris Williamson, chief economist at survey compilers Markit echoed the concerns but remained optimistic, saying the upturn in services suggested some resilience in the UK economy, against the headwinds it faces.

He said: “The December survey rounds off a reasonable fourth quarter for the service sector, which is likely to again provide the main stimulus to overall economic growth.

“Services are likely to have expanded by around 0.3%-0.4% in the final quarter, down from 0.7% in the third quarter but offsetting a renewed downturn in manufacturing and sluggish
growth of construction to help the UK avoid a slide back into recession, at least for now.”

This was posted in Bdaily's Members' News section by Tom Keighley .