Published: Thu, July 04, 2019
Money | By Ethel Goodwin

Services sector activity contracts in June; first time since May 2018: PMI

Services sector activity contracts in June; first time since May 2018: PMI

An index reading of above 50 indicates an overall increase in economic activity and below 50 indicates an overall decrease.

"Measured across the three sectors, inflows of new business fell in June for the fifth time so far this year, with the rate of decline gaining momentum to reach the second-steepest since April 2009".

New figures suggest the United Kingdom economy may have shrunk in the second quarter, the first quarterly contraction in three years.

"The latest downturn has followed a gradual deterioration in demand over the past year as Brexit-related uncertainty has increasingly exacerbated the impact of a broader global economic slowdown", said Chris Williamson, chief business economist at IHS Markit.

Brazil's services sector activity shrank in June for the third month in a row, a closely watched purchasing managers index survey showed on Wednesday in the clearest warning sign yet that the economy may have slipped back into recession.

GDP is expected to shrink by 0.1pc in the second quarter of the year as surveys of the private sector show businesses suffered their worst month in nearly three years in June.

Housebuilding was outperforming other manufacturing sectors until May, but there is now an evident drop in business confidence, that is the sharpest in month observed in three years.

The services PMI completed a trifecta of poor figures so far this week.On Monday, data showed the United Kingdom manufacturing sector slumped in June as a slowing global economy and Brexit uncertainty took their toll.

The headline seasonally adjusted index posted 43.1 in June, down sharply from 48.6 in May and below the 50.0 no-change mark for the fourth time in the past five months.

The market had been expecting the reading to remain at 51.0. Indeed, the rate of contraction in service sector employment was the fastest in 10 months, IHS Markit said.

Andrew Wishart, an economist with consultancy Capital Economics, said the pre-March 29 rush accounted for some of the second-quarter weakness.

Additionally, firms increased their output prices at a moderate rate in June, as the pace of inflation quickened slightly from May.

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