Services sector pressure on Bank of England meeting

By DOMINIC JEFF
Published on 05/07/2012 00:00

Britain’s dominant services sector stalled in June, suggesting the economy is unlikely to have pulled out of recession in the second quarter and adding to pressure on the Bank of England to take action at today’s meeting.

The Markit/Cips purchasing managers’ index (PMI) released yesterday came in at 51.3, down from 53.3 in May and its lowest reading since October.

Although the reading is still above the 50 mark that indicates growth, evidence from purchasing managers’ surveys has proved optimistic in recent months.

Chris Williamson, chief economist at Markit, said it was one of the worst performances since the recovery began three years ago and showed signs that the sector’s 18-month run of growth was in danger of stalling.

Data earlier this week showed the manufacturing and construction data were both in decline in June, as the extra holiday for the Queen’s diamond jubilee disrupted already-weak trading.

Economist Howard Archer, of IHS Global Insight, said: “It is evident that service sector activity is being limited by difficult conditions in the private sector as well as by tighter government spending. Concerns over the outlook, fuelled by the eurozone’s problems, are likely leading to some business being delayed or cancelled.”

The latest PMI data is expected to help tip the balance on the Bank of England’s monetary policy committee, which was last month divided on whether to print more money to give the economy a boost.

DOMINIC JEFF