Services sector decline speeds up

The services sector declined again in April to the second lowest reading on record with businesses seeing no end to the current economic downturn.

According to the NCB Purchasing Managers Index (PMI) survey of services firms – ranging from banks to haulage companies – business activity fell to 32.2 from 35.7 in March, and just ahead of the series record low of 31.8 in February.

Any reading below 50 indicates contraction.

Firms reported continuing falls in new business and were pessimistic last month regarding future activity and expect the current downturn to continue.

Survey respondents said the ongoing economic uncertainty meant many clients were postponing purchasing decisions.

Jobs were cut in services firms at pace only slightly below January’s record rate due to lower business volumes and efforts to reduce costs.

Some 37 per cent of the 300 survey respondents said staff numbers dropped last month, making April the 14th consecutive month employment in the sector declined, according to Markit, which compiles the data. Just 5 per cent of companies increased employment last month.

Transport and leisure firms reported the sharpest job losses followed by business services firms. Technology, telecoms and media firms suffered the lowest level of job losses in the sector.

Approximately one third of companies expect their business volumes to be lower in 12 months time and expect the current downturn to last for at least the remainder of this year. However, around a quarter of respondents said they expect activity levels to rise.

The measure of business expectations for 12 months’ time was 46.4 in April, following a reading of 50.8 in March.

The reading for profitability declined considerably in April and fell to its weakest level since September 2008. Falling sales and decreased output meant profitability fell last month to its lowest level since September 2008.