Bleak expectations for services sector

5 July 2011

5 July 2011 | Adam Leach

Confidence levels in the UK services sector have dropped to their lowest since October, according to the latest purchasing managers’ index.

The Markit/CIPS Business Activity Index reported an overall figure of 53.9 in June. This means while there was growth, its rate has stagnated with the figure remaining broadly unchanged from the 53.8 figure recorded in May.

The survey found that confidence levels have dropped to the lowest level since October, with purchasers feeling downbeat about current economic prospects. It also found that the rate of new employment had come to a standstill.

Chris Williamson, chief economist at Markit, said: “Private sector services activity rose at a marginally faster rate than in May, but growth for the second quarter as a whole looks to have slowed from 0.8 per cent in Q1 to 0.5 per cent. Gross domestic product therefore could have risen by just 0.3 per cent at best in Q2, down from 0.5 per cent in the first three months of the year.

“The fractionally faster rate of growth of business activity also masked some more worrying signs in some of the other survey indicators. Inflows of new business rose at the slowest pace for four months in June, and optimism about the coming year hit an eight-month low.

CIPS CEO David Noble said: “A downbeat mood is evident among some in the sector as confidence regarding future activity softened significantly during June. Businesses are less than sure-footed due to worries around austerity measures and general economic conditions.”

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