Is the services sector creaking?
There is no doubt that the UK services sector is the engine room of the UK economy and has been for some time. However, despite the fact that towards the end of 2009 and early 2010 we saw progress in the sector, last month's revelation that job cuts and a slowdown in business hit the sector were a body blow to those looking for short-term economic recovery in the UK.
The underlying situation is perfectly reflected in the Chartered Institute of Purchasing and Supply survey which has fallen from 57.5 in February to a nine-month low of 52.8 in May. While anything above the 50 level indicates growth in the sector, it is evident that we are seeing a deceleration of activity at the moment. One of the main problems now is that concern can breed confusion and further concern and could end up moving into a vicious circle.
Whether the influence of external problems is starting to hit the UK is open to debate, such as the European debt debacle, but one thing is for sure, the UK services sector will need to recover if the UK economy is to move back into overdrive. The future is extremely clouded at the moment.
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