Monday, November 05, 2012
Service sector PMI falls
Posted by David Smith at 01:10 PM
Category: Thoughts and responses

The service sector puchasing managers' index might have come to the rescue following weak manufacturing news but it was not to be. It dropped to 50.6 in October, from 52.2 in September. The composite PMI, made up of construction, manufacturing and services, dropped to 49.7, suggesting a modest overall contraction in economic activity.

"Further growth of UK services activity was recorded during October, although the rate of expansion slowed to a marginal pace. Growth of new business also eased during the month, leading companies to deplete backlogs of work. Meanwhile, staffing levels were reduced for the second month running.

"On the price front, a further solid increase in input costs was recorded in October, but companies were still reluctant to fully pass on higher cost burdens to their clients and output prices rose only marginally.

"The headline seasonally adjusted Business Activity Index posted 50.6 in October. Although this reading still signalled an expansion in services activity during the month, it was below the mark of 52.2 in September. Moreover, the rate of growth was the slowest in the current 22-month period of rising activity.

"Those respondents that recorded an increase in business activity linked this to signs of improving underlying demand and client confidence. However, other panellists reported that these improvements remained only tentative. Strong competitive pressures were also mentioned."

The PMIs show that the fourth quarter has started on a weak note. The only crumb of comfort may be that they are not always well correlated with official data.