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Outlook for IT services sluggish following spending review

Kathleen Hall

The IT sector showed further signs of slowdown in October, with growth broadly in line with the average for the services industry, according to Paul Smith, senior economist at analyst firm Markit Economics.

Although sales showed a stronger improvement than the previous month, rates of increase remained below long-run trends, he said.

"While marketing raised sales and activity, growth was reportedly constrained by clients digesting the announcement of government cutbacks," said Smith.

Uncertainty surrounding the impact of the spending review appears to be dampening optimism in the sector. "On balance, we are likely to see the continuation of relatively sluggish growth in IT and across the service sector going forward," he said.

There is a concern that unemployment will start trending upwards again, placing further pressure on domestic demand, he added. "While I do not foresee a return to recession, what worries me on a wider scale is that jobs are not really being created by the private sector, particularly in services, which, given its sheer size, is the dominant employer in the UK," said Smith.

According to the Chartered Institute of Purchasing and Supply's index, activity in the services sector rose by 0.4% in October to 53.2. A score over 50 signals growth in the industry.


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