UK services sector contracts
The UK service sector registered a fall in business activity in July, according to the latest PMI survey data from IHS Markit and CIPS.
Output and new business both declined for the first time in over three-and-a-half years and at the fastest rates since early-2009. Consequently, employment in the sector was unchanged since June, ending a three-and-a-half-year period of uninterrupted job creation. The 12-month outlook for activity weakened sharply to the lowest since February 2009, linked to uncertainty regarding ‘Brexit’.
The Business Activity Index fell to 47.4 in July, from 52.3 in June and the volume of incoming new business also declined for the first time since the end of 2012. Companies widely reported that the outcome of the EU referendum had weighed on new business inflows during the month.
Service providers held their workforces constant, on average, in July and cost pressures reached a three-month high, linked to salaries, fuel, food prices and the impact of the weaker sterling exchange rate.
That said, inflation remained weaker than the long-run survey average and UK service providers expect business activity to rise over the next 12 months, although sentiment in this area was the weakest since February 2009.