Markets were caught off guard today by signs of a moderation in growth of the services sector.
The latest snapshot of services activity from Markit/CIPS for June gave a reading of 57.7, well above the 50 mark that separates growth from contraction. But it was down on May’s 58.6 reading and below analysts’ expectations.
The composite index of activity, which includes construction and manufacturing, also eased to 58.4, down from May’s 59.1 reading.
Sterling fell a quarter of a cent upon the release of the data to $1.7139, partially reversing some of the strong gains seen earlier this week. Gilt futures also pared their losses.
However, Chris Williamson of Markit said the survey had produced another “strong number” and predicted GDP would expand by 0.8% again in the second quarter.
There were other signs of momentum in the services survey, despite the headline slowdown, with the sharpest increase in new business volumes in six months.
“A renewed upturn in growth of new orders across all three sectors suggests that the economy should also pick up speed again as we move into the second half of the year,” said Williamson.
Hiring remained strong in the sector, which accounts for three quarters of output. The employment index rose to 58.8 in June, a record for the survey, which began in 1996.
Parallel surveys of the construction and manufacturing sectors in June, which were released this week, pointed to strengthening growth.
Manufacturing activity rose at the strongest rate in seven months, while construction firms were working at the fastest rate since the survey began in 1997.
