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Markit: US service sector growth cools in June

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Markit:  US service sector growth cools in June

Composite index lowest since January.

According to financial services firm Markit, June data pointed to solid rises in business activity and incoming new work across the U.S. service sector, but both rates of expansion moderated since the previous month.

Job creation also eased in June, although the latest increase in payroll numbers was still faster than the trend seen since the survey began in late-2009. At 54.8 in June, down from 56.2 in May, the seasonally adjusted Markit Flash US Services PMI Business Activity Index posted above the neutral 50.0 threshold for the twentieth successive month. Although the latest reading pointed to a solid upturn in service sector output, the rate of expansion slowed to its weakest since January.

In line with the trend for output, latest data highlighted a further moderation in new business growth from March’s recent peak. Anecdotal evidence suggested that improving domestic economic conditions continued to support new order volumes, although some firms noted a degree of caution among clients about the business outlook. Reflecting this, service providers signaled the least optimistic year-ahead outlook for business activity since March.  The degree of confidence in June was also weaker than the average since the survey began in October 2009.

The surveys suggest that GDP growth could slow appreciably in the third quarter.”

Service providers continued to add to their payroll numbers in June, driven by new product launches and efforts to boost capacity. That said, the pace of job creation slowed for the first time in 2015 to date. Some firms noted greater caution about the business outlook, although there were also reports suggesting that skill shortages had delayed staff placements in June.

Meanwhile, input cost inflation accelerated across the service economy in June. The latest increase in average cost burdens was the fastest for just over a year-and-a-half. A number of survey respondents cited higher food prices in June. Stronger cost inflation in turn contributed to the most marked rise in service providers’ average prices charged since September 2014.

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