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10/26/2015 11:45:11 AM

Markit/PMI Report on Services - September round up

Global market researchers, Markit, produce the UK Services Purchasing Managers’ Index (PMI) report for the Chartered Institute for Procurement and Supply (CIPS) on the first working day of each month. The report is designed to give a snapshot of the state of the UK economy and draws data from approximately seven hundred British companies.

Markit and CIPS UK have discerned a “header figure” for the survey that is seasonally adjusted. It is referred to as the ‘Services Business Activity Index’, and it is a single figure designed to track changes in UK services activity against the month before. Simply put, results above 50.0 demonstrate a growth in activity compared with the previous month, whilst a result below 50.0 indicates a drop.
 

September summary

As it reached the end of the third quarter the British services sector continued to experience a slowing rate of growth throughout September. The total business activity across all sectors and the volume of incoming new work increased at the slowest pace since April 2013.

Looking at the bigger picture, the overall trajectory for growth dipped to its lowest point for over a year. Whilst there has been a stable rise in input prices, service providers have only increased them by a small amount, blaming worries over salary pressures for their caution. On a brighter note, the report confirmed September experienced the strongest rise in employment since June this year.
 

Activity in the service sector – key points

  • The Business Activity Index fell to 53.3 in line with a pattern that has been forming since June to hit a record low for the period; the lowest in two and a half years. This resulted in the Index being significantly lower than average levels (around 55.2).
  • Despite this, business activity has now risen continuously since May 2009 (excepting small contractions during Christmas 2010 and 2012). Of the companies surveyed, 25 percent stated their companies experienced higher business volumes than in August.
  • In September, activity in the British construction sector accelerated at the fastest pace since the first quarter, with each area (residential, commercial and civil engineering) showing positive growth rates as a result of an increase in housebuilding.
  • However, perhaps a foreshadowing of things to come, September also saw the lowest number of construction project tenders agreed since April. 
  • Overall performance in the UK manufacturing sector remained poor throughout September, resulting in Q3 becoming the weakest qaurter for manufacturing since 2013.

What does this mean for employment?

Employment growth was broad across all six sectors during the third quarter of 2015. The top ranking sector for job creation was the Financial sector, closely followed by Business-to-Business Services, which has maintained a rise in its workforce throughout September.

The Hospitality sector continues to languish at the bottom of the pile and registered the weakest growth in employment. However, responses from business owners in the sector noted an improvement in declining headcounts compared to last quarter.

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