The UK and Eurozone’s service sectors are seeing slower growth, new figures show, but are still expanding at levels consistent with robust economic growth.
Markit’s purchasing managers’ index – a survey of firms – dropped to a score of 57.4 in July for the UK service sector from 58.5 in June, according to figures released today.
Despite the drop, the figure remains above the 50 score that indicates no growth.
It marks over two years of continuous service sector expansion. The sector accounts for around 79 per cent of the UK economy.
The strong survey means the UK can expect to grow strongly, according to Martin Beck, senior economic advisor to the EY Item Club. However, he warned other sectors of the economy are struggling.
"The only fly in the ointment is the manufacturing sector, where both the PMI results and official data have pointed to a much weaker performance than that enjoyed by services and construction, suggesting that the two-speed economy remains a key theme,” he said.
Exports, in both services and manufacturing, have been held back by weak growth in the Eurozone, the UK’s biggest export market.
The Eurozone’s service sector PMI edged down to 54 in July from 54.4 in June. While the survey indicated that growth in the Eurozone’s service sector had slowed, it is only slightly less than June’s four-year high.
The data point to economic growth of 0.4 per cent in the three months to June, with the same rate of growth continuing into July, said Markit chief economist Chris Williamson. It would mark a sustained improvement in growth for the currency-bloc which flirted with a third recession in six years in 2014, following the crisis in Ukraine and sanctions imposed on Russia in response.
Economists also point to a slowdown in China, the world’s second-largest economy, as a reason why demand for exports from both the UK and Eurozone are waning.