UK service industry activity falls to lowest level in 19 months

Weak results from service sector attributed to pre-Olympic disruption, bad weather and eurozone crisis

Activity in Britain’s service sector slipped to its lowest level since the end of 2010 last month as bad weather, disruption in the run-up to the Olympics and the crisis in the eurozone hit demand.

The monthly snapshot of business conditions from CIPS/Markit showed the sector – which accounts for three-quarters of Britain’s economic output – slowed to almost stall speed in July.

Following downbeat reports from manufacturing and construction earlier this week, the closely watched purchasing managers index (PMI) for services dropped from 51.3 to 51 last month.

A reading above 50 suggests that activity is increasing, but July’s finding was the weakest for 19 months.

Howard Archer, economist at IHS Global Insight, said: “While there were reports that poor weather early on in the month and pre-Olympic disruptions hindered services sector activity in July, the underlying tone of the report is undeniably soft. Given that services activity would have been hit in June by the two days public holiday, there should have been some bounce-back effect in July, but new business growth was muted in addition to overall activity slowing.”

Chris Williamson, economist at Markit, said that when taken together, the PMIs for manufacturing, construction and services pointed to the weakest economic performance since April 2009, adding that the downturn could only in part be attributed to temporary factors.

“Markit’s all-sector PMI fell for the fourth month running in July, down from 51.1 in June to 49.5, signalling the first monthly fall in output since April 2009.

“The decline was led by the sharpest drop in manufacturing output for three years, while growth of services activity was only modest and the weakest since heavy snowfall disrupted business in December 2010. Construction activity also rose only moderately, but the increase was at least an improvement on the downturn seen in June.” © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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