CIPS warns service sector slowdown continues

by brian_turner

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A survey by the Chartered Institute of Purchasing & Supply (CIPS) showed that the UKâ€™s service sector grew at its slowest rate for three months in August. CIPSâ€™s Services Business Activity Index fell to 55.2 in August compared with 56.3 in July. The slow-down was attributed to record oil prices, which pushed up fuel and energy costs.

Although the figure was below the expected 56, the service sector grew for the 29th month in a row.

According to the CIPS, the transport, communications, hotels and restaurants sector grew most, suggesting that the July terrorist attacks on London had caused little long-term damage to tourism.

The survey recorded increased overseas spending on UK services, helping offset lower demand at home.

The CIPS stressed that there was still concern about the strength of the economy and higher wage costs. The organisationâ€™s business expectations index also slowed last month.

Roy Ayliffe, director of professional practice at CIPS said: “Business sentiment about the future took a slight knock amid concerns amongst service providers over the performance of other sectors of the economy”.

Mr Ayliffe said the this was most evident in the financial services sector.”

However, data last week from CIPS showed that the manufacturing sector had returned to growth in August, and construction activity was growing at its fastest rate for a year.

CIPS expects the UK economy as a whole to grow by between 0.6% and 0.7% in the third quarter - up from 0.5% in the second quarter.

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