For six month in a row the powerhouse services sector increased in June. Although business confidence reduced to the lowest in over six months amidst fears that the economic recovery is slowing. A CIPS/Markit survey where growth is recorded with a reading of 50 or higher showed a reading of 53.9 for June just up from the 53.8 in May but substantially below the long term average.
New business rose for the month as the sector able to recover from business disruption due to Easter, the Royal Wedding and also previously delayed projects commenced. However the rate that business increased was at its lowest level since February and levels of optimism are at a nine month low as companies are giving a bad assessment of the economic conditions currently.
The results today mean the services sector representing 75% of the economy grew at only the rate of 0.5% in 2011’s second quarter which was down from the three previous months. This increased fears that economic recovery in the UK has slowed recently. Markit economists estimate the growth of the economy was at 0.3% for the second quarter in comparison to the 0.5% growth in the first quarter.
Employment levels remained flat because of uncertainty in the economy as companies do not have the confidence to hire new staff. David Noble, chief executive at CIPS said Solid and steady new business growth has helped the service sector in the UK to maintain themselves above the water as overall activity is coasting along at below level pace.
Also consumer spending has decreased due to the squeezing affective of inflation and household pay not being able to stay up. High street is seeing very tough conditions with many retails falling into administration while other chains are announcing store closings.