UK’s services sector hit by slowdown, but continues to grow

The UK’s service sector is on a three-month growth spree, however new data showed a slowdown between February and March despite record export growth.

The S&P Global/CIPS UK services PMI survey showed a reading of 52.9 last month, down from a score of 53.5 in February. Experts had forecast that the score would hit 52.8.

Any score above 50 means that the sector is growing, according to the survey.

The businesses which were asked reported their biggest jump in export sales since the survey started tracking that data in September 2014.

“Export sales provided an additional boost to the service economy during March as the ongoing recovery in business travel and events helped to drive the fastest rise in new orders from abroad for at least eight and a half years,” said Tim Moore, economics director at S&P Global Market Intelligence which compiles the survey.

Similarly the increase in costs that these businesses faced eased to its lowest for 22 months, but remained “exceptionally strong”, the surveyors said.

“Prices charged by service sector businesses increased at the weakest rate for 19 months in March, which provides a clear signal that competitive pressures and improved supply conditions will start to bring down headline rates of consumer price inflation in the coming months,” Mr Moore said.

Dr John Glen, chief economist at the Chartered Institute of Procurement and Supply, said: “The biggest surge in new business for 12 months in the dominant services sector could trigger hopes that a turnaround is finally on the horizon for the UK economy.”

He added: “Consumer confidence improved, adding to levels of orders on the domestic front, while the highest rise in exports since September 2014 added another cheerful note.

“Not to put too much of a dampener on these upbeat results, the inflationary effects of higher input costs and prices charges remained significant.

“Salary rises were still one of the biggest costs to business, along with supplies such as food and drink, despite the weakest overall rise in input prices since May 2021.

“There are still concerns over a tight labour market, how interest rates affect borrowing and investment decisions, plus rising debts with disposable incomes remaining restricted.”

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