UK private sector contracts

UK private sector activity contracted for a second consecutive month in June as weakness in the services sector deepened, according to the S&P Global flash UK composite output index.

The index fell to 49.4 points in June from 49.7 in May, driven by the services sector, where the business activity index fell to 48.7 points from 49.3, its lowest level in 41 months.

Manufacturing remained in expansion territory, although the headline manufacturing PMI eased to 53.1 points from 53.9, a three-month low and below the FXStreet-cited consensus of 53.6.

Service sector activity was hit by rising costs and weaker customer confidence, with many firms citing the conflict in the Middle East and domestic political uncertainty.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "A disappointing June ’flash’ PMI indicates that the economy contracted for a second successive month, albeit at only a 0.1% rate and merely flat-lining over the second quarter as a whole.

"Price pressures remain elevated as companies point to the energy shock and supply squeeze from the war in the Middle East as exacerbating existing cost pressures from government policies.

"These higher costs, combined with subdued business growth expectations for the year ahead, have caused employment to continue to fall at a worryingly high rate."

"For the growth and inflation outlooks, much depends on progress towards an end to the conflict in the Middle East, but closer to home we are seeing signs of the unstable political environment unsettling business confidence and delaying spending, which will also need to calm in order to lay better foundations for economic growth to revive."