Markit and the Chartered Institute of Purchasing and Supply (CIPS) released today the UK’s service sector report for August 2013. Data received from the survey of 700 firms which provide services showed a strong growth of activity and new business.
A quarter of the businesses surveyed reported an increase in activity, which has risen at the fastest pace since December 2006. The seasonally adjusted Business Activity Index rose to 60.5 in August from 60.2 in July, registering the highest reading in over six years.
The growth was chiefly supported by a rise in new business, which has been rising for eight successive months. The August increase was the sharpest seen for over 16 years.
Growth in new work was the best seen since May 1997. However, due to the increase in new work, backlogs have risen for a fifth successive month, with the sharpest rise for 13 years. Some companies hired additional staff and there has been a net increase in employment recorded for eight months in a row.
UK service providers expect continued growth over the next year and 50% of respondents are forecasting business expansion. With reports of a strengthening market and an improvement in the housing market, companies had more confidence to convert enquiries into hard contract wins.
Input price inflation was sustained while wages and (where applicable) food bills were higher during August. Many businesses commented on increased fuel prices and high utility bills were frequently mentioned as a source of inflation.
For the third successive month an increase has been recorded in output as competitive pressures and efforts to support sales weighed on output charge inflation.