Survey's patchy picture on consumer activity

The latest Service Sector Survey by the Confederation of British Industry (CBI) was conducted between July 28 and August 11 and covered 165 service sector firms.

Both the value and volume of business in consumer services fell in the past three months, when they had been expected to rise.

Values fell by a balance of minus eight per cent and volumes fell by a balance of minus five per cent.

Looking to the next three months, firms expect a modest improvement in these measures, with balance figures of eight per cent for value of business and nine per cent for volume of business.

Prices continued to rise, for the third quarter in a row, with a balance of 19 per cent while costs also rose with a balance of 23 per cent.

The overall profitability of business fell in consumer services, with a balance of minus 14 per cent. Looking forward to the next three months, firms expect profitability to fall further, with a balance of minus 26 per cent.

In business and professional services, value of business fell, with a balance of minus 13 per cent, and volume was little changed in line with expectations, though the measure of volume of business was

lower than it would have been under the previous survey classification, coverage and weighting.

As with consumer services, value and volume of business continued to be seen as well below normal.

Ian McCafferty, CBI chief economic adviser, said: "These survey results highlight that activity across the economy is patchy, with some sectors doing better than others. And such conditions are likely to continue into next year.

"Although our recent retail surveys have shown increased sales of high street goods, this survey shows that households are

still reluctant to spend on services. Conditions remain difficult for consumer-facing firms,

as volumes of business have edged lower over the past quarter.

"Firms selling to business and professional firms have seen their volumes move sideways over the past three quarters, and no growth is expected over the next three months.

"Unsurprisingly, business confidence in this sector has fallen for the first time in over a year.

"We will not know the precise impact of public sector spending cuts, and how they will affect employment, until the Comprehensive Spending Review late in October.

"In the meantime, there is uncertainty about the strength of demand in the coming year, and services firms are not optimistic about prospects for business expansion."