Thursday July 5, 2012
UK services growth weakens to 8-month low
LONDON: Britain's dominant service sector grew at a much weaker pace than expected last month despite firms cutting prices and running down existing orders, a business survey showed.
The latest round of gloomy data will solidify expectations the Bank of England (BoE) will restart its printing presses and support the economy with another round of quantitative easing when it meets today.
The Markit/CIPS purchasing managers' index (PMI) for the services sector, which accounts for around three-quarters of output, sank to an eight-month low of 51.3 in June, below May's 53.3 and well shy of expectations for a more moderate easing to 52.8. A reading over 50 signals growth and the index has held above the breakeven mark for 18 months, but Markit said the latest figures suggested the sector grew by only 0.2% last quarter.
Worryingly for policymakers, once again some of that minimal growth was generated by fulfilling existing orders. The outstanding business index has been in contractionary territory for 14 of the last 15 months.
“The services economy saw one of its worst months since the recovery began three years ago, with the June survey showing signs of growth stalling. The services PMI probably cements the case for further stimulus from the BoE,” said Markit chief economist Chris Williamson. - Reuters