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Financial News: UK Service Sector Growth Eases On Weak New

UK Service Sector Growth Eases On Weak New Orders

07/05/2017 - 07:55:00 (RTTNews)

(RTTNews) - Britain's service sector expanded at a slower pace in June as new order growth hit a nine-month low, survey data from IHS Markit and the Chartered Institute of Procurement & Supply showed Wednesday.

The services Purchasing Managers' Index dropped slightly more-than-expected to 53.4 from 53.8 in May. Economists had expected a 53.5 reading.

Although the reading remained above the 50 no-change mark for an eleventh consecutive month, the survey suggested the slowest expansion in services output since February.

The slowdown in business activity growth in June was linked to a softer rise in incoming new work. New orders logged its weakest upturn since September 2016.

Brexit-related risk aversion and heightened economic uncertainty were holding back client spending, the survey showed.

Sustained pressures on operating capacity led to a solid expansion of staffing levels. The latest increase in employment was the strongest since April 2016.

June data pointed to a sharp and accelerated increase in average cost burdens.

Input price inflation was much slower than the peak seen in February. Greater operating costs were linked to a combination of rising staff salaries and increased raw material prices.

Consequently, the latest rise in average prices charged by service providers was the slowest since July 2016.

Service providers were optimistic overall that business activity will rise over the next 12 months. However, the degree of confidence fell markedly since May.

The survey data still suggests that GDP growth has re-accelerated in the second quarter, after the sharp slowdown experienced in the first three months of the year, Scott Bowman, an economist at Capital Economics, said.

When taken together with other survey evidence and the hard data so far, the economist reckoned that GDP growth accelerated to around 0.5 percent in the second quarter.

"Although the three PMI surveys are running at levels that are historically consistent with GDP growing by around 0.4 percent in the second quarter, it's clear that the economy heads into the third quarter losing momentum," Chris Williamson, chief business economist at IHS Markit, said.

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