Services sector activity falls despite growth forecast
Across the consumer as well as business and professional services volumes and values fell
The dominant services sector reported further falls in business volumes and values in the three months to August, confounding expectations for growth, a new business study showed on Tuesday.
The latest quarterly CBI service sector survey found that across consumer as well as business and professional services, which accounts for around three quarters of output, activity fell.
The latest grim data will add pressure to the chancellor to loosen his austerity plan aimed at cutting the budget deficit and begin spending to instil confidence in businesses and consumers in order to kick start the economy, which is in its second recession in four years.
Consumer services reported volumes and values falling at a similar pace to the previous quarter, while optimism was much lower than three months ago.
Profitability among consumer services fell due to rising employee costs, falling volumes and flat prices, the CBI said. Those employed in the sector fell slightly as did training.
Expectations for the outlook continued to look bleak as respondents said they expected volumes to fall at a similar rate, the speed of the fall in values would accelerate and the decline in profitability would also accelerate.
Business confidence among professional services was also lower in the three months to August than it was three months ago, according to the survey.
“Conditions in the service sector have not improved as expected this quarter, with firms now more negative about the overall business situation than they were three months ago,” Anna Leach, CBI head of economic analysis, said.
“Companies selling services to consumers continue to face challenging times, with price-cost pressures and a weak business environment squeezing profits,” she added.
The survey, carried out between 27 July and 15 August with 196 businesses, polls accountancy, legal and marketing firms as well as hotels, restaurants and travel and leisure companies.
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