PMI services survey: Easing in expansion, but stellar pace of growth - EY ITEM

4 April 2014

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  • Services survey eases a touch but growth remains strong
  • Backlogs are increasing and employment continues to rise
  • PMI surveys collectively suggest GDP growth of 1% in 2014Q1.

Martin Beck senior economic adviser to the EY ITEM Club comments on today’s PMI services survey:

“March’s services PMI told a similar tale to the same month’s surveys for manufacturing and construction – an easing in the pace of expansion, yet the sector still growing at a stellar pace.

“The services survey points to businesses optimism for the economy being underpinned by increasing backlogs of work. And strong demand combined with a moderation in input prices looks positive for profits, which should further boost firms’ feel-good factor.

“Firms’ thirst for extra workers appears unquenched, despite soaking up labour at a rapid rate over the past year. With the services sector dominating UK employment, further recruitment in the sector looks likely to drive the headline unemployment rate below 7% soon.

“The first quarter of 2014 has seen a collection of robust PMI numbers, pointing to GDP expanding at a quarterly rate of around 1% in the first three months of the year. Admittedly, the survey data has presented a rosier picture of the economy than the official number in recent quarters. But even if growth were to come in a touch below what the CIPS surveys are indicating, 2014 will still have got off to a very promising start.”