By Daniel Hunter
The underlying performance of the UK service sector remained positive in April, with activity, new business and employment all recording growth.
Expectations also remained positive, reaching a twenty-five month high, although margins were again under pressure — input costs rose to the strongest degree in three months but output charges were little changed compared to March.
The headline index from the survey, the Business Activity Index — which is based on a single question asking respondents to report on the actual change in business activity at their companies compared to one month ago — posted 53.3 in April. Indicative of solid growth, the index has now registered readings above 50.0 for 16 consecutive months, although a fall from March’s 55.3 pointed to the weakest expansion since last November.
Underlying the continued gains in activity was a further solid rise in volumes of incoming new business. Panellists reported success in converting enquiries into new contracts amid an improvement in underlying business sentiment. That said, anecdotal evidence implied companies continued to work hard to secure business amid reports of clients remaining reluctant to commit spend.
“The service sector started the second quarter on a weaker note than in the first quarter, but continued to grow at a reasonable pace," Chris Williamson, Chief Economist at survey compilers Markit.
"Companies continued to report rising levels of new business, which helped drive confidence to the highest for over two years. From what we are hearing from panellists, this certainly does not sound like an economy in recession.
“Even though the weaker services growth follows similar slowdowns in manufacturing and construction, the PMI surveys suggest that the economy will have expanded again in April, and that the recent gloomy official data pointing to a downturn in the first quarter will eventually be revised to show modest growth.
“The big question is whether the data are weak enough to encourage the Bank of England to provide further stimulus to the economy. It is likely that the MPC may wait until more information is available on both output and inflation, but these numbers will add weight to the view that the economy needs a further dose of medicine to help get growth back on course.”
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