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Financial News: UK Services Activity Expands Least In 7 Months

UK Services Activity Expands Least In 7 Months

07/03/2024 - 07:40:00 (RTTNews)

(RTTNews) - The UK service sector's growth moderated further in June to the lowest level in seven months amid softer demand conditions ahead of the upcoming general election, final survey data from S&P Global showed on Wednesday.

The S&P Global Services Purchasing Managers' Index dropped to 52.1 in June from 52.9 in the previous month. The flash score was 51.2.

The reading remained above the threshold of 50.0 for the eighth straight month.

Nonetheless, more growth momentum was curbed by client hesitancy and delays in the sign-off of new projects due to the upcoming general election. New orders received by British service providers grew at the weakest rate in seven months.

Meanwhile, there was a slight rise in export orders, with more demand from clients in North America and Europe.

Firms showed some reluctance to take on additional staff as employment growth slowed and was marginal overall.

On the price front, cost pressures remained sharp in June amid a higher wage bill, increased shipping costs, and higher raw material prices. However, the rate of inflation slowed to the lowest since February 2021. On the other hand, selling price inflation accelerated slightly from May's 37-month low.

Looking ahead, service companies remained optimistic about expected business activity over the next twelve months, as they anticipate a strengthening of the UK economy, investment, lower interest rates, and better sales performances will lift activity levels.

The composite output index also dropped to 52.3 in June from 53.0 in May, indicating that the private sector growth in the UK logged the weakest in this year so far.

"While costs, mostly from wages, have been the major driving force behind strong service inflation, the recovery of the UK economy from its late-2023 lull adds another dynamic for policymakers to consider should stronger economic conditions motivate more companies to raise their prices," Joe Hayes, principal economist at S&P Global Market Intelligence, said.

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