Having lagged manufacturing when it comes to the recovery from the impact of the pandemic, services trade could now be back on the move.
The Confederation of British Industry’s (CBI) quarterly Service Sector Survey has found that optimism has surged in the three months leading up to May.
Sentiment across business and professional services saw a record improvement this quarter, up from +23% last quarter to +63%, the Times reports.
Business and consumer services boost
In consumer services, optimism rose at the quickest pace since May 2014, at +47% compared to -39% in the three months to February 2021.
Business and professional services volumes rose at the fastest rate on record, from -21% to +50%.
Profits up
In terms of profitability, both sub-sectors are returning to growth.
Business and professional services rose to +14% from -26% in the previous quarter and is set to accelerate to +41% next quarter.
Consumer services’ profitability was at +5% from -48%, marking the first rise since February 2018. Profits are expected to continue to grow at a faster rate next quarter (+15%).
Ben Jones, CBI Principal Economist, said: “With the reopening roadmap on track and the vaccine rollout delivering, it’s no surprise to see an uptick in optimism across the sector. Both sub-sectors are expecting strong business growth over the next few months as restrictions continue to lift.
Global struggle
At a global level, the services sector recovery has lagged behind manufacturing, the WTO noted in a report in January.
Global services trade in the third quarter of 2020 fell 24% compared to the same period in 2019, representing only a small uptick from the 30% year-on-year decline registered in the second quarter.
Slower service recovery
The statistics confirmed expectations that services trade would be harder hit by the pandemic than goods trade, which was only down 5% year-on-year in the third quarter.
“Foregone expenditures on tradeable services could be directed elsewhere, with consumers shifting to goods instead,” the report said.
“Unlike goods, services cannot be stockpiled, which means that despite pent-up demand, many of the revenue losses from cancelled flights, holidays abroad, restaurant meals, and cultural/recreational activities are likely to be permanent.”