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Service sector activity slows in October 3 November 2011

Sector activity fell in October from the previous month with the Markit/Cips services purchasing managers’ index (PMI) falling from 52.9 to 51.3.

The PMI survey also showed employment in the sector suffered a small decline. And E&Y adviser Nida Ali is concerned the figures indicate the sector is struggling to stay afloat.

Q4 growth uncertain

She warned the output charges, coupled with the poor manufacturing PMI, indicate growth in Q4 could grind to a halt.

"The services sector seems to be achieving low levels of growth in Q4, with the slowdown in new work implying that companies are finding it harder to win business," she explained.

"A closer look at the release reveals some unsavoury trends. The reduction in output charges means that companies were forced to lower prices in response to muted demand.

"This is a cause for concern and could be the start of a worrying trend."

However, the survey did show business confidence had reached its highest level since May, with price inflation also at its lowest level for almost a year.

Economic gloom

But, despite this week’s figures confirming the economy grew by 0.5 per cent for the last quarter, Ali painted a bleak picture for the coming months.

She added: "Combined with the dismal figures for manufacturing earlier this week, it seems likely that there will be barely any growth in Q4.

"The economic outlook has deteriorated sharply in recent months and, with the Eurozone crisis showing no signs of abating, already weak growth prospects are dominated by downside risks."

By Andy Pearce



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