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Financial News: UK Service Sector Contracts Sharply Amid Covid-19 Pandemic

UK Service Sector Contracts Sharply Amid Covid-19 Pandemic

05/05/2020 - 05:44:00 (RTTNews)

(RTTNews) - UK service sector contracted sharply in April as emergency public health measures to stem the coronavirus, or covid-19, pandemic weighed on business activity, final survey data from IHS Markit showed Tuesday.

The IHS Markit/Chartered Institute of Procurement & Supply services Purchasing Managers' Index plunged to 13.4 in April from 34.5 in March. The flash reading was 12.3. Prior to the last two months, the survey-record low stood at 40.1 in November 2008.

Latest data signaled survey-record declines in new work, backlogs and employment across the service economy. Adding to downward pressure on sales volumes, new business from abroad slumped in April.

A combination of lower payrolls costs, fuel prices and office overheads led to a drop in average cost burdens for the first time since the survey began in July 1996. At the same time, the rate of decline in average charges was the fastest in the survey history.

Business expectations for the next 12 months picked up very slightly from March's record low.

The composite output index fell to 13.8 in April from 36.0 in March. This was above the flash score of 12.9.

Service sector activity dropped at a slightly steeper rate than manufacturing output, with the latter supported to some extent by food and drink, pharmaceuticals and other healthcare-related production.

Tim Moore, economics director at IHS Markit, said historical comparisons of the PMI with GDP indicate that the April survey reading is consistent with the economy falling at a quarterly rate of approximately 7 percent, but the actual decline in GDP is expected to be even greater, in part because the PMI excludes the vast majority of the self-employed and the retail sector.

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