Data released by S&P Global/CIPS showed that activity growth in the UK private sector slowed in June, but exceeded economists' forecasts. A loss of growth momentum was also seen in new orders.
The UK composite PMI fell to 52.3 points (6-month low) from 53.0 points in May. Economists had expected a drop to 51.7. Meanwhile, the services PMI declined to 52.1 points from 52.9 points in May. Consensus estimates suggested a drop to 51.2. The latest reading was the lowest since November 2023. However, both indices are above the 50-point mark, which indicates an expansion of activity in the sector, for the eighth month in a row.
"We are seeing some evidence of a pre-general election seize up across the UK services economy, with growth in business activity slowing to a seven-month low in June as the prospect of a change in government led to the adoption of a "wait-and-see" approach by some, restraining sales. Nevertheless, we're on track for another quarter of GDP growth, according to Composite PMI data for the three months to June, albeit one that will be less punchy than the first quarter's 0.7%," said Joe Hayes, Principal Economist at S&P Global Market Intelligence.
The report showed that the rate of new business growth was only modest and the weakest in seven months. However, the growth rate of foreign orders accelerated slightly compared to May. Outstanding business volumes fell again in June, recording the sharpest pace since November 2023. As for the prospects for business activity in the services sector in 12 months' time, almost half of the respondents (48%) said they forecast growth. However, the overall confidence level fell to a seven-month low as some companies were concerned about the potential uncertainty caused by a change of government. Meanwhile, employment growth slowed and was generally only modest. In some cases, firms made redundancies and opted to not replace voluntary leavers to cut costs. The rate of input price inflation was the slowest since February 2021. Prices charged increased at a slightly stronger rate during June, however. The rate of inflation accelerated slightly from May's 37-month low and was considerably stronger than seen on average since the survey began in 1996.