Slight Increase In Services Output

The seasonally adjusted index of services published by the ONS is estimated to have increased by 0.6% in December 2012 compared with December 2011. Three of the four service sector index components increased during the period, most recent month compared with the same month a year ago. The services sector index number for December was 103.7. The index of services has not follwed the line of the double dip recession but has enjoyed a long period of growth and is above its pre-recession peak. The weakness in the economy is coming from other sectors.

The most resilient of the components making up the service sector index has been government and other services. It is now above its pre-recession peak after a period of decline. Not all components have fared so well. Business services and finance are slightly below the pre-recession peak as are distribution, hotels and restaurants and transport, storage and communication. It is to be expected that government services would do well during a recession as services relating to unemployment, careers and skills are in greater demand as automatic fiscal stabilisers come into effect.

The largest contributions to the overall increase came from distribution, hotels and restaurants with a 2% increase and government and other services which increased by 1%. Transport storage and communication increased by 0.5% but business services and finance decreased by 0.3%.

Looking at the quarterly comparison, between Q3 and Q4 services output decreased by 0.1%. The estimate from the GDP preliminary estimate for Q4 of no difference was slightly up on the actual figure. The estimate published is consistent with the second estimate of GDP. When comparing this quarter with the same three months in 2011 output increased 1.2%. The main contributors to the decrease came from government and other services with a decrease of 0.8% and distribution hotels and restaurants with a decrease of 0.5%. Upward pressure came from transport, storage and communication with an increase of 1.2% and business services and finance with an increase of 0.2%. The third quarter figures were helped by the Olympics and Paralympics.

The monthly comparison for December shows that service sector output decreased by 0.4% between November and December 2012 but increased by 0.6% when compared with December 2011. Transport, storage and communication increased by 0.5% during the month but the other three components decreased including a fall of 0.8% in business services and finance.