Britain’s services sector slowed down in June, hitting hopes it would save the UK from another quarter of recession and increasing the pressure on the Bank of England to pump more money into the economy to stimulate growth.
The monthly Markit/Cips Purchasing Managers’ Index, which is a snapshot of the sector, fell to an eight-month low of 51.3, down from 53.3 in May. The sector, which accounts for 75% of UK output, is still growing but it slowed down more than City analysts had been expecting. “It confirms the subdued nature of economic activity in the UK and the need for more monetary stimulus” David Page of Lloyds Bank said. The City is expecting the Bank’s monetary policy committee to extend its £325 billion quantitative easing programme by between £50 billion and £75billion at its monthly meeting tomorrow.
Markit reported that the net effect of the Jubilee holidays in June was to depress economic activity, as additional spending was offset by fewer working days. There were also signs that the ongoing eurozone debt crisis undermined consumer and business confidence. Retailers were also forced to cut their prices for the second month running to win new business, despite rising input costs.
Chris Williamson, chief economist at Markit, said June was one of the worst months for services since the end of the last recession.
This week PMI surveys of the construction and manufacturing sectors showed a sharp contraction of activity in June. Markit said the combined surveys suggest Britain’s GDP will shrink by 0.1% in the second quarter of this year.
