Services companies in the U.K. saw the first contraction in activity in over a year and a half during December due to harsh winter weather, raising concerns over an overall economic contraction in the last month of 2010, according to The Daily Telegraph. The Markit/Chartered Institute for Purchasing and Supply reported on Thursday that its purchasing manager’s index for services showed the first contraction in activity since April 2009, with the index falling to 49.7 in December. The index had been at 53 in November, and the drop was linked to winter weather as well as declining demand on public spending cuts.
The poor services data comes on the heels of weak construction data, although manufacturing accelerated, offering reassurance that the economy would remain in a recovery in the fourth quarter of the year. Chris Williamson of Markit said, “There is a strong indication that U.K. economic growth is completely reliant upon export sales while domestic demand has wilted.” A separate report from the Office of National Statistics found that business profitability reached an 11.9% return on capital in the third quarter of 2010, which was the highest since the start of 2009.
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