The last three months has seen a slowing of demand across the service sector, with a marked slowdown in consumer services, according to the CBI/Grant Thornton Service Sector survey.

The study found that consumer spending in those service industries most affected, such as cinemas, gyms and hairdressers, fell this quarter at the fastest rate in the survey’s 10-year history.

It found that firms providing professional services to business, such as telecoms, IT consulting, architects and recruitment agencies reported that growth in their business volumes held up rather better over the last three months.

In spite of the slower growth in demand, businesses have stayed in good health, continuing to grow profits and create more jobs.
In both parts of the service sector, the growth in numbers employed exceeded expectations, with a strong pick up in numbers employed in consumer services in the pre-Christmas period.

Ian McCafferty, the CBI's chief economic adviser, says: "Demand for services has eased over the past three months with signs that firms serving the consumer are finding life increasingly difficult. Although there is little sign that the credit crunch is having the same effect on business services companies, these firms’ expectations for the coming months are unspectacular.

"Price rises across the service sector have not been as strong as earlier in the year, but consumer services expect to have greater pricing power in the coming quarter, consistent with the upward pricing pressures also evident in the retail and manufacturing sectors.”