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UK services sector appears buoyant according to latest Markit/CIPS UK Services PMI

05 January 2012

According to the latest Markit/CIPS UK Services Purchasing Managers' Index (PMI), the final month of 2011 provided a positive end to the year for UK service providers as activity and incoming new business both rose at their strongest rates since July. There were reports that enquiry levels were up, with higher marketing and promotional work helping to drive growth.

The Chartered Institute of Purchasing & Supply
The Chartered Institute of Purchasing & Supply

A number of panellists continued to report that the economic climate remained tough, reflected by continued margin pressure (costs again rose steeply while output charges were little moved), while business confidence matched the two-and-a-half year low seen in September.

The headline index from the survey – the seasonally adjusted Business Activity Index – posted a five-month high of 54.0 in December, a solid improvement on November’s 52.1. Growth was sustained throughout each month of 2011 (although generally at sub-trend rates) and the latest rise in activity was driven by a similarly solid increase in new business.

Respondents noted some success in converting higher enquiry levels into new business wins, while the use of marketing tools also supported sales (and activity) growth in the latest survey period.

Nonetheless, and in line with the general theme of recent months, a number of panellists reported that operating conditions remained challenging given the backdrop of austerity measures and the well documented economic difficulties in Europe. The uncertainties of the true impacts of these factors on future activity weighted on confidence in the latest survey period, with business sentiment dropping to a level that matched September’s post-recession low.

Meanwhile, for the wider economy, faster growth of services and construction activity, alongside a stabilisation of manufacturing output in December suggests the pace of economic growth accelerated slightly at the end of 2011. But growth over the fourth quarter as a whole looks likely to have been the weakest since the tail-end of the recession in the second quarter of 2009. The outlook also remains uncertain, reflected in historically low levels of business optimism for the year ahead.

The UK Services PMI report can be viewed here.

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