Activity in UK’s service sector continues to improve in June

The report from IHS Markit and Chartered Institute of Procurement & Supply (CIPS) indicated on Friday that the worst phase of the service sector downturn had passed as more businesses start to reopen and adapt their operations to meet social distancing requirements.

According to the report, the Markit/CIPS UK Services Purchasing Managers' Index (PMI) jumped to 47.1 in June from 29.0 in May, signaling a continuing turnaround in business conditions across the UK service sector.

Economists had forecast the indicator to increase to 47.0. The 50 mark divides contraction and expansion.

The latest reading was the highest since February, but still under the neutral 50.0 threshold.

According to the report, subdued demand and disruptions related to the COVID-19 pandemic were cited by respondents as factors constricting business activity in June, while an easing of lockdown measures and reopening of the UK economy had a favourable impact on business activity.

Inflows of new work fell the least since the downturn began in March. Meanwhile, export sales continue to decline at a steeper rate than overall new business volumes during June, reflecting ongoing international travel restrictions. Elsewhere, backlogs of work across the UK’s service sector recorded another steep reduction in June, while the rate of job shedding eased to its least marked since the start of the downturn in March.

The UK All Sector Output Index, a weighted average of the UK Manufacturing Output Index, the UK Total Construction Activity Index and the UK Services Business Activity Index, came in at 47.7 in June, up from 30.0 in May. This was the highest reading for four months.