Service Sector Activity Maintains Momentum, Expands Most in Two Years

The September CIPS/Markit UK Services PMI figures, released today, show:

• The headline seasonally adjusted Business Activity Index reached 55.3, the highest in two years.
• Over Q3 as a whole, the index averaged 54.2, the best performance over a quarter since Q3 2007.
• For the third successive month incoming new business rose, growing at the strongest pace for nineteen months in September.
• Backlogs continued lower as evidence of excess capacity remained.
• Staffing levels declined for a seventeenth consecutive month as the issues of over capacity continue to be dealt with through a combination of natural wastage and redundancies.
• Average output charges continued to declined for a eleventh successive month, though there was some evidence deeper cuts were prevented due to rising input costs.
• Optimism was at its highest since April 2007, with companies expecting to benefit from an ongoing strengthening of the economic climate. However, widespread expectations of future growth were tempered given the low base from which any improvement would start.

The CIPS/Markit UK Services PMI covers transport & communication, financial intermediation, business services, personal services, computing & IT and hotels & restaurants.

Release: Markit Economics [PDF]

Note: The index is a “diffusion index”, it is calculated by adding together the percentage of respondents that reported an improvement plus half of the percentage that reported no change. Results will vary around the 50.0 “no-change” level. Readings above 50.0 signal an improvement, readings below 50.0 a deterioration. The greater the divergence from 50.0, the greater the rate of change anticipated by respondents.

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