Britain’s huge service sector performed better than expected in June but growth is still not strong enough to generate jobs.
The Markit/CIPS headline services PMI index nudged up to 53.9 last month from a three-month low of 53.8 in May.
The figure was above economists’ forecasts of 53.5, but below its long-run average, as business confidence slipped to an eight-month low.
Data in the past week revealed a drop in manufacturing growth and a subdued construction sector, where companies laid-off staff at the sharpest rate in five months, suggesting Britain’s recovery failed to gain traction in the second quarter.
Chris Williamson, Markit’s chief economist, predicted UK second-quarter GDP growth of 0.3pc at best, noting that services growth appeared to have slowed to 0.5pc, from 0.8pc in the first three months of the year.
“Worries over the impact of government austerity measures continue, and a number of panelists were pessimistic about economic conditions in general,” the survey noted on Tuesday, adding that “growth remains below trend (as does that of activity) and subsequently the service sector continues to offer little in the way of job creation.”
The only bright spot was on the inflation front. Input prices and prices charged both increased at their slowest pace this year, providing hope that inflation in the broader economy – currently more than double the Bank of England’s 2pc target – will begin to ease.
Reluctant to jeopardise Britain’s fragile recovery, the central bank looks set to keep interest rates at a record low not just this week but for the rest of the year, with investors not fully pricing in a rise in UK rates until next June
Markit also reported that service activity in the eurozone was weaker than expected, with job losses seen in Italy, Spain and Ireland and Germany and France still leading the recovery, despite marked slowdown in the latter.
The final Markit Eurozone Services Business Activity Index fell to an eight-month low of 53.7 in June, down from 56.0 in May and below the earlier flash estimate of 54.2.