U.K. Private Sector Shrinks For Second Month

(RTTNews) - The UK private sector contracted for the second straight month in June due to the sustained weakness in the services sector, flash results of the purchasing managers' survey by S&P Global showed Tuesday.

The flash composite output index dropped to a 14-month low of 49.4 in June from 49.7 in the previous month.

The downturn was caused by the services sector, where sharply rising costs and lower consumer sentiment dampened activity. The weakness in services was partly offset by an increase in manufacturing output. At 48.7, the services Purchasing Managers' Index hit a 41-month low and dropped from 49.3 in May. The score was seen at 50.0.

The manufacturing PMI dropped more-than-expected to 53.1 from 53.9 in the previous month. The expected reading was 53.5.

"A disappointing June 'flash' PMI indicates that the economy contracted for a second successive month, albeit at only a 0.1 percent rate and merely flat-lining over the second quarter as a whole," said S&P Global Market Intelligence Chief Business Economist Chris Williamson.

New business volumes declined at the fastest rate in 14 months, leading to a steeper fall in backlogs of work and a trimming of headcounts.

Regarding inflationary pressures, the PMI survey showed that input prices continued to rise sharply in June. However, the rate of inflation moderated from April's 41-month high, leading to a slightly softer increase in selling prices.

Finally, expectations for the coming twelve months improved in June from May's recent nadir, although they remained weaker than the levels observed prior to the Middle East conflict.