Businesses defy high working costs

05-09-2006

Despite struggling under the burden of high utility, energy and fuel costs, service sector businesses have continued their "robust growth", it has been claimed.

The latest purchasing managers' index from the Chartered Institute of Purchasing and Supply (CIPS) says business activity has continued improving, but at a slower level, in August this year.

As a direct result of higher costs, which the CIPS survey found were accelerating in its average input prices index, the CIPS' employment index slackened in August and output prices were forced upwards.

"Firms were forced to raise output charges in an attempt to recoup some of the costs. This, along with sector concerns over general inflation and the economic outlook, saw business confidence in the sector drop to its lowest since March 2003, the start of the Iraq war," commented Roy Ayliffe, the CIPS' director of professional practice.

"Despite this, purchasing mangers remain optimistic for the future, with almost 50 per cent anticipating a higher level of activity in the next year."

The overall CIPS rating for service businesses fell from 57.9 last month to 56.7, but still remained significantly above the nominal 50 base level.

Meanwhile the manufacturing output index fell from 54.8 in July to 54.1 this month, continuing the decline from a peak earlier this year in June.

Yesterday's engineering outlook survey from the Engineering Employers Foundation (EEF) showed that Britain's manufacturing sector remains reliant on orders from overseas to prop up stagnant demand from the domestic market.


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