Thursday, March 03, 2011
Service sector bows to manufacturing
Posted by David Smith at 02:30 PM
Category: Thoughts and responses

There's no doubt what is driving the economy at the moment, and it is not the service sector. The purchasing managers' index for the sector dipped from 54.5 in January to 52.6 in February. That's growth but, as Paul Smith of Markit points out, not very rapid growth.

"February saw growth of the UK service sector return to the modest rates seen prior to the weather related readings of December and January, leaving it on course to deliver around 0.3% q/q growth for Q1," he noted". Even with strength in manufacturing and the upside surprise to February construction data, the economy looks likely to deliver a rate of expansion that only offsets the decline in Q4 2010 to leave the underlying trend in GDP ‘flattish’.

“Although there were some positive elements from the forward-looking indicators from the survey – new business is rising at a solid clip and confidence reached a nine-month high – net employment continued to fall. With activity not rising sufficiently to generate jobs growth, there remains concern that the private sector as a whole will struggle to offset public sector employment cuts."

Not for the first time, it is a pity we don't have a bigger manufacturing sector.