Slowdown contagion hits services sector: PMI survey |
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Sat, 04 Jun 2005 11:40
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Along with manufacturing and retailing, the services sector was also hit by the slowdown in consumer spending, according to new figures.
The latest purchasing managers’ index (PMI) registered a drop from 56.5 in April to 55.1 in May. The sector has seen the slowest growth since last February as firms struggled to pass on increased costs to consumers.
According to economists, the services sector which constitutes the bulk of the economy was expected to take the impact of a slowdown in consumer spending sooner or later.
The PMI is a monthly survey from the Chartered Institute of Purchasing and Supply. Economists insist that it could have been worse for the services sector when compared to the manufacturing sector’s PMI readings for the last two months. Construction was another sector similarly affected. These reports have led economists to forecast that borrowing rates will remain frozen at 4.75% until the year end.
| An analyst from a reputed investment firm said the current health of the economy reflected two conflicting forces – weakening domestic demand and global manufacturing on the one hand and a stabilizing property market plus steady global demand for goods on the other. Which way the economy is headed, will be known for sure in the next few months.
A few market watchers feel that since the PMI survey did not include the retail sector it may not be an accurate indicator. Growth in some sectors, they argue, could be lower than indicated, because business on the high street has been the worst since the end of last year and expected to drag for some more months.
However, most agreed that the Bank of England now had to consider cutting base rate before the end of the year. The Bank’s Monetary Planning Committee meets next week to decide on the interest rate. They are expected to keep rates unchanged for the ninth month running.
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