This July, the UK’s service sector expanded at its fastest rate for four months. According to an industry survey, the Markit/Cips services purchasing managers’ index (PMI) increased to 55.4 from 53.9 the month before.
Any figure above 50 indicates growth, but the increase surprised experts, who had anticipated slower activity for the month. Despite the increased activity, however, the report showed that jobs in the service sector had been cut. During the two months prior to July, employment in the service sector had slightly gone up.
The anticipated slower activity was a factor in the costs of goods purchased by companies. Increases in costs slowed, but as a direct result of the utility price increases and other energy hikes, and other factors such as supply chain constraints or the overall higher cost of survival, costs stayed at a higher level. Even so, inflation was at its lowest level in ten months for the costs of goods purchased from service companies.
The highest increase in service activity was in the Business Services and IT and Computing areas of work. These sectors have seen more growth than most over the course of the economic crisis, with employment remaining at a higher level for these jobs and financial problems fairly low, as consumers continue to purchase these services.
Other services, such as financial services, hotels, catering, and restaurants, saw slower growth. These rely on disposable income in order to make money. Consumers are purchasing these services less and less as inflation stays relatively high, the cost of living increases, and savings rates remain low. David Noble, chief executive of the Chartered Institute of Purchasing and Supply put the differences down to these cost of living issues, saying, “Yet again it’s the segments most exposed to consumers’ lack of disposable income that suffered most, and all businesses are being hit by inflation and rising utility bills.”
A similar survey on Monday showed a slowdown in orders for manufacturing over the month of July. Vicky Redwood, senior UK economist at Capital Economics, maintains that the figures, though showing a small increase, do not change the opinion of analysts. “The survey does not alter the picture of a pretty sluggish recovery,” she said.