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Business activity returned to growth across Italy's service sector at the end of the second quarter, after falling slightly and for the first time in 17 months during May. There was also positive news on the employment front, with job creation reaching the fastest in 2016 so far. However, survey data pointed to a squeeze on margins, as cost inflation accelerated to a 13-month high but prices charged decreased. The headline Markit Business Activity Index - which is based on a single question asking respondents to report on the actual change in business activity at their companies compared to one month ago - registered 51.9 in June, up from May's 49.8. That signalled a renewed upturn in service sector business activity, albeit with the rate of expansion being only moderate. Growth in incoming new business picked up to the fastest for four months in June, with a number of panel members commenting on new client wins amid a general strengthening of demand. Nevertheless, the amount of work-in-hand (both in progress and not yet started) at Italian services firms decreased for the tenth month in a row and at a faster rate than during May. One factor helping firms keep atop of workloads was rising staffing capacity. June saw the level of employment increase across Italy's services economy for the ninth straight month, with the pace of job creation reaching the fastest in the year to date.
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