January services sector affected by snow

The services sector in Britain slowed more than expected in January, and no doubt the snow and cold weather had a lot to do with it.

The Chartered Institute of Purchasing & Supply's purchasing managers' index (PMI) was down to 54.5, from 56.8 in December. Anything above 50 is growth, but the forecast had been for a score of 56.5.

CIPS chief executive officer, David Noble, said: “This may be a temporary blip caused by one-off events rather than signs of a double-dip recession, but we can't dismiss the possibility.

"The chaos caused by the snow hit this sector particularly hard, much more than manufacturing or construction, reducing the growth rates of activity and new business wins."

Nevertheless, Mr Noble was positive on a number of points.

"At ground level, employment is moving closer to a level of stabilisation and there's even evidence of recruitment in the financial sub-sector. And, it seems the VAT increase coupled with growing confidence and demand has encouraged some firms to raise their output prices slightly."

"Even with imminent tax increases and government spending cuts, confidence in the future is buoyant as wider economic pick-up is expected to offset any fiscal austerity to come."

Philip Shaw of Investec was not surprised at the low figure. And wondered how much the snow had been influential.

He said: "I think the policy implications are unchanged: certainly a rise in quantitative easing this week seems very unlikely and while we wouldn't totally rule out a further expansion of asset purchases, the likelihood is that £200bn will be the top."