UK’s service sector activity growth weakens in June

UK’s service sector activity growth weakened in June, based on the latest PMI survey data. The seasonally adjusted Markit/CIPS UK Services Business Activity Index dropped to 52.3 in June from May’s 53.5, matching April’s 38-month low. It hints at a relatively weaker growth rate of services output in the UK.

Activity grew every month since January 2013; however, the index averaged 52.7 in the second quarter, the weakest since the first quarter of 2013. The new business volume received by the service providers of the UK grew at a more rapid pace in June; however, the rise was the second weakest since the upturn started three-and-a-half years ago. Companies have reported that uncertainty connected to the EU referendum had frequently resulted in delaying or cancelling orders from customers.

The current weakness in new business inflows resulted in additional drop in the level of outstanding work in the nation’s service sector in June. For the third consecutive month, backlogs fell. It declined the most rapid pace since February 2013.

Service providers continued to hire workers on average in June. However, given the weak pace of new business growth and decline in backlogs of orders, the pace of job creation moderated to the slowest level since August 2013.

Pace of rise in average input prices was little changed from May. About 15 percent of companies registered cost inflation, connected to increased salaries and fuel prices. However, the overall rate of the rise continued to be historically weak, noted Markit.

In the mean time, there was a continued modest increase in the charges imposed by service providers. Business expectations softened in the last month. The overall strength of confidence was lowest since December 2012. Companies reported that uncertainty connected to the EU referendum's final outcome has been a drag on their activity outlook for the next 12 months.