Published: Tue, February 06, 2018
Markets | By Erika Turner

United Kingdom services sector shows sluggish growth

United Kingdom services sector shows sluggish growth

The IHS Markit/CIPS UK Services purchasing managers' index fell to 53 last month from 54.2 in December, below economist expectations of 54.1.

The reading was at the bottom end of a range of forecasts in a Reuters poll of economists and looked likely to widen the gap between Britain's slow-growing economy as it heads for Brexit and other countries gaining from a bounce-back in global growth.

The Caixin China General Services Business Activity Index, which mainly monitors small and medium-sized firms, rose to 54.7 last month, up from 53.9 in December.

Growth in the U.S. services sector slowed a little in January, according to final data released on Monday.

"The latest survey data signalled that capacity constraints remained evident across both the manufacturing and service sectors, as the volume of outstanding business rose for the twentieth successive month".

Recent strong economic data boosted hopes that the Bank of England (BoE) would be pressured into raising interest rates again in the near-term, but this month's trio of below-forecast PMIs has derailed upbeat hopes for the United Kingdom economy and softened the chances of interest rate hikes this year. In November, the index had stood at 48.5.

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He added that the hit to services sector expansion reflected "waning" growth in demand for businesses and consumer-facing services like hotels and restaurants, while transport and communications also suffered a drop in market appetite for the second month running.

Holding firm: The service sector figures come ahead of Thursday's Bank of England Monetary Policy Committee vote, where it is expected to hold interest rates at 0.5%.

On the price front, input prices continued to increase in January, led by higher prices of energy and fuel prices.

There has been an upsurge in the Indian service sector with it expanding in January. Business confidence rises to the levels of March 2017.

That had sparked a shift in expectations about United Kingdom interest rates, with investors raising bets on a hike as early as May.

He said: "The data should prompt investors to reassess their view that the chance of the Bank raising interest rates again as soon as May is as high as 50%".

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