Service sector

UK service sector growth better than expected in June

Growth in the UK services sector was stronger than expected in June, according to a survey released on Tuesday.

The S&P Global/CIPS the purchasing managers’ index for the sector rose to 54.3 from 53.4 in May, beating expectations and the early estimate of no change. It was also above the 50.0 mark that separates contraction from expansion for the sixth consecutive month.

However, the survey also showed new orders growth fell to a 16-month low in June as economic uncertainty and rising inflation hit discretionary spending.

Meanwhile, the composite PMI – which measures activity in services and manufacturing – climbed to 53.7 in June from 53.1 in May. However, it is the second lowest reading so far this year. A slowdown in manufacturing output growth to its lowest level since May 2020 was offset by a modest acceleration in service sector activity.

Tim Moore, chief economics officer at IHS Markit, said: “The services sector remained in expansion mode in June, but persistently high inflation has started to reduce discretionary spending and negatively influence demand projections in all areas.New orders growth was the weakest since the national lockdown in early 2021, with survey respondents reporting hesitation from businesses and consumers in response to the uncertain economic outlook.

“The June data highlighted the second-fastest rise in input prices since the survey began 26 years ago, driven by intense wage pressures and rapid increases in fuel costs. staff added to demand and supply imbalances, subsequent constraints on business capacity further incentive to defend margins against escalating operating expenses.About 37% of panel members reported an increase of their charges since May and many have commented on plans to push through further price increases in the second half of 2022.”