Services in doldrums due to activity slump
ACTIVITY in the services sector across the major developed markets continued to slow in June, according to leading surveys of the sector published yesterday.
In the UK, business activity rose at its slowest rate since August 2009, according to the Markit/CIPS purchasing managers’ index (PMI). The headline PMI fell to 54.4 in June, down from May’s 55.4.
David Noble, chief executive of CIPS, said: “June’s data painted a worrying picture for the UK services sector as confidence suffered a serious blow following the government’s emergency spending cuts.”
He added: “Though new business continued to grow this was at a subdued rate and kept employment levels firmly grounded. It seems that companies are increasingly hesitant to commit in this time of political and economic uncertainty.”
However, the composite PMI would still be consistent with GDP growth of about 0.5 per cent in the second quarter, analysts said.
In the Eurozone, the services PMI fell for the first time in five months with the drop spread across all countries in the currency union. The PMI highlighted the growing divergences in the euro area, said James Nixon at Societe Generale.
He explained: “While service sector activity remains relatively strong in France and Germany, there are strong signals that activity may have peaked. Moreover the recovery in Spain and Italy looks weak and anaemic.”
Across the Atlantic, the US Institute of Supply Management (ISM) said that services activity fell to 56.2 in June from 59.7 in May. This was the eleventh consecutive month of growth but it was a slower rate than expected.
Norbert Or at the ISM said that the slowdown in growth was to be expected after months of solid growth, adding that the “sector appears to be solidly entrenched in recovery”.