Election uncertainty weighs on UK services sector – PMI

The pace of growth in Britain’s services sector slowed in June, a closely watched survey showed on Wednesday, with the impact of the upcoming general election weighing on the economy.

Seasonally adjusted S&P Global The UK services sector business activity index was 52.1 in June, marking the eighth consecutive monthly increase in output.

However, this was a lower result than in May, when the index was 52.9, and the lowest since November.

Respondents said customers are waiting until July 4 to place orders or commission new projects. New customer additions grew at a historically muted pace, while job creation also cooled.

The UK PMI manufacturing production index, a weighted average of services and manufacturing indices, was 52.3, down from 53.0 in May.

An equilibrium above this value indicates growth, while below it indicates recession.

Joe Hayes, chief economist at S&P Global Market Informationsaid: “We are seeing some evidence that the UK economy has gained momentum ahead of the general election, with growth in business activity falling to a seven-month low in June.

“Still, according to the PMI data, we are on track for another quarter of GDP growth… albeit at a slower pace than the 0.7% seen in the first quarter.

“The recovery of the UK economy from a shutdown in late 2023 adds another dynamic that policymakers should consider if strong economic conditions motivate more firms to raise prices.”

Peter Arnold, UK’s chief economist EYsaid: “The PMI-to-GDP reading has been somewhat mixed over the past few years, partly due to the degree of volatility in sectors not covered by the survey.

EY Item Club expects the second quarter to be an example of this, as GDP growth slowed slightly between Q1 and Q2.

“(We doubt) these results will have any impact on the MPC’s thinking. (We expect) the first rate cut to come at next month’s meeting.”