UK PMIs: Services activity stabilises after lockdown plunge
UK services activity continued to contract last month, but bounced back from January’s dramatic tumble on optimism about a potential end to the pandemic.
The IHS Markit/Cips purchasing managers (PMI) index for services registered 49.5 in February, with any score below the 50 mark indicating contraction.
It came in just below analyst expectations of a score of 49.7.
The score is however a considerable improvement on January, where the index fell to 39.4, its lowest level since May, at the height of the first lockdown.
Despite the improvement, a combination of sales opportunities, hesitant clients, and some Brexit related disruption continued to weigh on activity.
Tim Moore, economics director at IHS Markit, said: “UK service sector activity was relatively stable in February and so it appears that the third national lockdown has seen limited spillovers to parts of the economy beyond the scope of government mandated closures.
“While customer-facing businesses continued to report severe constraints on activity due to the pandemic, there were signs of growth in technology and some business services after a disappointing start to 2021.”
The UK economy is highly reliant on the services industry, which makes up around 70 per cent of GDP.
Howard Archer, chief economic adviser to the EY Item Club, said: “Services activity was near to stabilisation in February after contracting at the fastest rate since last May in January.
“The hospitality, leisure and travel sectors saw reduced but still significant declines in activity as they remained largely closed, while there was modest expansion in business and financial services.”
He added that the figures showed that the impact of the latest lockdown was “substantially less” than last spring’s initial restrictions.
“Furthermore, the marked improvement in February’s index suggests activity has come off its January lows and eases some concern about the potential size of contraction in the UK economy in the first quarter”, he said.
In the Eurozone, services activity also recorded another contraction, posting a score of 45.7. It is the sixth straight month in which the index has registered a reading below 50 for the bloc.
Driving the reduction in regional activity was again a fall in levels of incoming new work, which were down for a seventh month in a row. Export sales were also lower, albeit at the slowest rate in the past year, IHS Markit said.