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Service sector growth cools, pointing to overall slowdown Service sector growth cools, pointing to overall slowdown
(7 months later)
The pace of growth in the service sector has cooled over the summer, suggesting momentum in the overall economy could ease in the second half of the year.The pace of growth in the service sector has cooled over the summer, suggesting momentum in the overall economy could ease in the second half of the year.
Consumer-focused firms such as hotels, bars and travel firms experienced their weakest expansion in a year, according to the CBI, with a balance of 25% more firms saying activity was up on last month compared with those recording a fall. Business and professional services such as accountancy, law and marketing grew at the slowest pace since November.Consumer-focused firms such as hotels, bars and travel firms experienced their weakest expansion in a year, according to the CBI, with a balance of 25% more firms saying activity was up on last month compared with those recording a fall. Business and professional services such as accountancy, law and marketing grew at the slowest pace since November.
But the CBI emphasised the mood of optimism in the overall sector, which accounts for about 78% of the economy, pointing out that lawyers, accountants and marketing specialists were being hired in the greatest numbers since before the financial crisis.But the CBI emphasised the mood of optimism in the overall sector, which accounts for about 78% of the economy, pointing out that lawyers, accountants and marketing specialists were being hired in the greatest numbers since before the financial crisis.
In its latest snapshot of the UK services sector, the business lobby group reported that business and professional service firms are feeling more confident about the economy, although almost half are concerned that skills shortages will cramp their expansion plans in the year ahead.In its latest snapshot of the UK services sector, the business lobby group reported that business and professional service firms are feeling more confident about the economy, although almost half are concerned that skills shortages will cramp their expansion plans in the year ahead.
According to the CBI's survey of 215 firms, 44% of professional services firms said head count was up on the previous three months, while 11% said it was down. The 33% positive balance means that employment has been growing at its fastest pace since November 2007. These employers said they expect hiring to accelerate during the next quarter, putting expectations for employment growth at 46%, the highest since 1998 when the survey began.According to the CBI's survey of 215 firms, 44% of professional services firms said head count was up on the previous three months, while 11% said it was down. The 33% positive balance means that employment has been growing at its fastest pace since November 2007. These employers said they expect hiring to accelerate during the next quarter, putting expectations for employment growth at 46%, the highest since 1998 when the survey began.
But 45% of these firms fear that shortages of professional staff will limit their expansion in the year ahead.But 45% of these firms fear that shortages of professional staff will limit their expansion in the year ahead.
Consumer-focused businesses were also upbeat about the economic climate, with 48% saying they were more optimistic than three months ago and only 4% less optimistic. A net total of 12% expect employment to go up in the next quarter.Consumer-focused businesses were also upbeat about the economic climate, with 48% saying they were more optimistic than three months ago and only 4% less optimistic. A net total of 12% expect employment to go up in the next quarter.
These firms also reported plans for record spending on their businesses: a net total of 16% expect to invest in land or buildings, the highest since 2010; while spending on vehicles and machinery is set to be at a record high - 29% of consumer firms have investment plans in this area. These firms also reported plans for record spending on their businesses: a net total of 16% expect to invest in land or buildings, the highest since 2010; while spending on vehicles and machinery is set to be at a record high - 29% of consumer firms have investment plans in this area.
A total of 43% of firms in consumer-facing industries said business was better than three months ago, while 17% reported that takings were down. The resulting 25% balance is well above average, but the slowest point of growth since August 2013.A total of 43% of firms in consumer-facing industries said business was better than three months ago, while 17% reported that takings were down. The resulting 25% balance is well above average, but the slowest point of growth since August 2013.
Katja Hall, CBI deputy director general, said: "The slowing in the pace of growth and profits in the service sector reflects our view that momentum in the economy will ease in the second half of the year.Katja Hall, CBI deputy director general, said: "The slowing in the pace of growth and profits in the service sector reflects our view that momentum in the economy will ease in the second half of the year.
"Employing more staff and planning to increase investment are positive steps in the quest for sustainable growth. However, skills shortages mean it is increasingly hard for firms to find and hire the right people. It's important that business and government address this issue together, to put the economy of the future on the right footing.""Employing more staff and planning to increase investment are positive steps in the quest for sustainable growth. However, skills shortages mean it is increasingly hard for firms to find and hire the right people. It's important that business and government address this issue together, to put the economy of the future on the right footing."
The latest service sector survey comes after manufacturers reported that wages are rising faster than any other part of the economy. The engineering and manufacturing employers' association EEF reported that pay rose by 2.6% on last year at a time when wage growth has been at a near standstill.The latest service sector survey comes after manufacturers reported that wages are rising faster than any other part of the economy. The engineering and manufacturing employers' association EEF reported that pay rose by 2.6% on last year at a time when wage growth has been at a near standstill.
At the weekend the Bank of England deputy governor Ben Broadbent said UK workers may not see growth in their pay packets any any time soon.At the weekend the Bank of England deputy governor Ben Broadbent said UK workers may not see growth in their pay packets any any time soon.