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Stronger U.K. Service Sector Adds To Signs Of Second-Quarter Rebound

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  • 'All-sector' PMI rises to eight-month high in June.
  • Rising current activity contrasts with subdued business confidence about the outlook.
  • Employment growth ticks higher but limited by uncertainty and rising skill shortages.
  • Input cost inflation spikes higher.

June's UK PMI surveys indicated a strong end to the second quarter, with business activity increasing at the fastest rate for eight months in response to an upturn in order book growth. Price pressures also rose markedly during the month.

The signs of the economy rebounding in the second quarter accompanied by rising price pressures will add to expectations that the Bank of England will hike interest rates at its August meeting. Yet the details of the survey hint at the need for caution.

Of greatest concern, companies' views on expected future growth remained worryingly downbeat. The survey responses indicate that political uncertainty, and Brexit in particular, continues to stoke nervousness about the outlook.

The fact that current business activity growth remains resilient despite business confidence being so subdued remains one of the most positive aspects of the survey, but does little to assuage worries about the longer-term sustainability of growth, and hints at widespread caution in relation to business investment.

Second-quarter 0.4% growth

The IHS Markit/CIPS PMI surveys collectively indicated the fastest pace of economic growth for eight months in June. At 55.0 against 54.3 in May, the 'all-sector' PMI output index rose for a third successive month from March's weather-related low to reach its highest since last October.

At 54.2, the average PMI reading for the three months to June is up from 53.1 in the first three months of the year and indicative of the economy growing by 0.4% in the second quarter.

News of the fastest service sector growth for eight months came on the heels of the construction PMI hitting a seven-month high and further modest manufacturing growth, pointing to a broad-based expansion. Construction was buoyed by unusually warm weather, with June seeing near-record temperatures, and the weaker pound was reported to have helped boost manufacturing via improved export

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IHS Markit (Nasdaq: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 key business and government customers, including 80 percent of the Fortune Global 500 and the world’s leading financial institutions. Headquartered in London, IHS Markit is committed to sustainable, profitable growth.

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