| CATEGORY: NEWS AND ANNOUNCEMENTS |
Wed 04 Jul 2012
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LONDON (SHARECAST) - Business sentiment has slumped to its lowest level so far this year as the eurozone debt crisis and the prospect of a post-Olympics lull weigh on confidence.
The Purchasing Managers' Index for the service sector, which makes up the lion's share of the UK economy. dropped to an 8-month low of 51.3 in June.
This compared with a reading of 53.3 in May, according to research firm Markit. Anything above 50 shows expansion.
This slowdown was due in part due to the Jubilee celebrations interrupting business but also the underlying deterioration of confidence.
Businesses said they had received a boost ahead of the Olympics but the air of uncertainty around the eurozone had led to business plans being put on hold.
Chris Williamson, Chief Economist at Markit, said June marked one of the worst months for the service sector since the recovery began three years ago.
"The data suggest that the sector grew by only around 0.2% in the second quarter, though the quarterly rate of growth will have slowed close to stagnation in June, boding ill for momentum going into the third quarter," he said.
"A steep drop in service providers’ expectations about the year ahead also casts a gloomy shadow on prospects for the sector in the short-term," he added.
Margins remained under some pressure as operating costs continued to rise over the month.
Increased energy, labour, supplier and travel prices all served to drive up input prices in June, more than offsetting reports of lower fuel costs.
Employment in the service sector increased for a seventh successive month in June as companies responded to recent rises in workloads.
However, the rate of expansion was only modest as business said they were not replacing staff leaving their firms as one way of controlling costs.
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