Fall in services output points to steady Q2, but slowdown in the near term looks likely - EY ITEM Club comments

05 July 2016

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  • Services output suffers blow…
  • …with activity balance matching April’s 38-month low
  • Surveys may be understating Q2 growth but slowdown now looks likely

Martin Beck, senior economic advisor to the EY ITEM Club, comments:

“A fall in services output took the activity balance back to April’s 38-month low and pointed to services growth over Q2 as a whole running at the slowest rate since the first three months of 2013.

“June’s services survey caps off a generally weak set of surveys for the month, with a rise in the manufacturing PMI offset by a steep fall in the construction index and today’s poor services reading.

“However, the official data available so far for Q2 is at odds with the surveys’ findings. Data points to GDP growth outpacing the first quarter’s 0.4% pace. But now that the uncertainty surrounding the UK’s future relationship with the EU has been crystallised, a marked slowdown in activity in the near-term seems highly likely. The response of policymakers will bear heavily in alleviating this.”