Investing.com – Activity in the U.K. service sector fell slightly more than expected in June for a second consecutive month, dampening optimism over the British economy as the sector makes up approximately 80% of gross domestic product, industry data showed on Wednesday.
In a report, market research group Markit said the seasonally adjusted IHS Markit/CIPS services purchasing managers’ index (PMI) decreased to 53.4 last month from a reading of 53.8 in May.
Analysts had expected the index to drop to only 53.5.
On the index, a level above 50.0 indicates expansion in the industry, below 50.0 indicates contraction.
The report indicated that new business growth eased to a nine-month low and business optimism dropped to second-lowest since December 2011.
On the upside, job creation picked up to a 14-month high.
“Survey respondents cited anxiety related to the Brexit negotiations, alongside worries about the general economic outlook and heightened political uncertainty,” the report explained for the low levels of optimism.
IHS Markit chief economist Chris Williamson pointed out that all three PMI surveys had shown weakness.
He noted that while the data suggests growth of around 0.4% in the second quarter, “it’s clear that the economy heads into the third quarter losing momentum.”
“Given the deterioration in the forward-looking indicators, such as business optimism and order book growth, the risks are tilted towards the economy slowing in the third quarter,” Williamson concluded.
Following the report, GBP/USD was trading at 1.2900 from around 1.2901 ahead of the release of the data, EUR/GBP was at 0.8791 from 0.8798 earlier, while GBP/JPY traded at 146.53 compared to 146.47 previously.
Meanwhile, European stock markets traded with mixed signs as London’s FTSE 100 rose 0.13%. The benchmark Euro Stoxx 50 lost 0.40%, France's CAC 40 inched up 0.05%, while Germany's DAX fell 0.20%.