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The UK's all-important services sector rounded off a difficult second quarter with better-than-expected growth in June, figures on Tuesday showed.
The latest S&P Global/CIPS UK services purchasing managers' index expanded to 54.3 points in June, from 53.4 in May. It was the sixteenth successive month in which the index has registered above the 50.0 mark, which separates growth from decline.
The final June figure was above the 53.4 flash estimate.
However, the PMI's average reading for the second quarter was 55.6 points, down from 59.1 in the first three months of 2022.
S&P Global said: ‘Higher inflation and worries about the economic outlook led to hesitancy in relation to new orders during June. The overall rate of new business expansion was only marginal and the weakest seen for 16 months. Export sales bucked the trend in June, with growth the strongest since February as some firms benefited from the removal of pandemic restrictions in overseas markets and the resumption of international business travel.’
‘Average prices charged by service providers continued to rise at a rapid pace in June, with the rate of inflation only fractionally lower than May's record high. Some 37% of the survey panel indicated an increase in their output charges during June, while only 2% noted a reduction. Anecdotal evidence suggested that escalating fuel costs, greater wage bills and imbalanced demand and supply were all factors contributing to higher prices.’
Confidence took a knock, however, due to rampant inflation and a grim economic outlook. Optimism stands at its lowest level since May 2020, shortly after the onset of the Covid-19 pandemic.
The composite PMI - which averages the services and manufacturing readings - ticked up to 53.7 points in June, from 53.1 in May. Despite the acceleration in growth, it was the second-weakest reading so far in 2022.
‘Total new business volumes increased only marginally in June, with the rate of expansion the weakest since the current phase of growth began 16 months ago. Export sales stabilised in June as solid growth in the service economy helped to counterbalance another marked decline in the manufacturing sector,’ S&P Global said.
Figures on Friday showed UK manufacturing sector activity fell to a two-year low in June as inflationary pressures remained elevated.
The S&P Global-CIPS UK manufacturing purchasing managers' index fell to 52.8 in June from 54.6 in May and was revised down from an initial estimate of 53.4. It was the lowest reading in two years.
The services survey is sent to a panel of 650 firms. Responses are collected in the second half of the month.
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