THE UK's service sector grew at a weaker pace than expected in June, adding to the recent disappointing economic data.
Following poor numbers from the manufacturing and construction sectors the Markit/CIPS purchasing managers' index showed the service sector sank to an eight-month low of 51.3.
Although the biggest part of the UK economy has now been growing for 18 months, with a number higher than 50 signalling expansion in the survey, the figure was well below May's 53.3 and less than market expectations of around 52.8.
The Queen's Diamond Jubilee disrupted trade while new business slowed as traders worried about a post-Olympics lull.
Analysts believe the Bank of England is now likely to restart its quantitative easing programme today with the PMI surveys indicating flat gross domestic product across the second quarter of the year.
Martin Beck, from Capital Economics, said: "While still above 50, the historical relationship between the index and actual output growth points to broadly flat quarterly services output growth. While some allowance must be made for the impact of the extra bank holiday in June, the underlying picture appears to have deteriorated. In particular, the business expectations index for the year ahead dropped sharply from 69.2 to 64.4, taking this measure to its second lowest level in two years. And any bank holiday effect may have been offset to some degree by an increase in activity ahead of the Olympics."
Chris Williamson, chief economist at Markit, said: "The services economy saw one of its worst months since the recovery began three years ago, with the June survey showing signs of growth stalling. The ser-vices PMI probably cements the case for further stimulus from the BoE."
The prices charged by services companies fell amid discounting and a lack of demand. This put profit margins under pressure, with operating costs driven up as rising energy, labour and travel prices more than offset lower fuel costs.
Howard Archer, chief economist at IHS Global Insight, said: "Even allowing for the fact services activity was likely held back by the public holiday, this looks to be a soft survey."
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