United Kingdom services sector growth falls to 16-month low

Frederick Owens
February 6, 2018

However, any reading above 50 indicates expansion in the sector.

The Caixin China General Service PMI rose to 54.7 at the beginning of the year from 53.9 in December, according to the survey conducted by financial information service provider Markit and sponsored by Caixin Media. Nonetheless, panelists mentioned that sustained rises in sales, acquisitions and new offerings underpinned output expansion.

The final composite output index rose more than initially estimated to 58.8 in January from 58.1 in December.

Downside risks remain due to signs of moderating demand for manufactured products and rising costs that weigh on service companies, Zhong warned. Having been the strongest in four years in November, input price inflation stabilized at a relatively weak level in January, while businesses increased their charges at a slightly faster rate.

A closely watched survey shows that the 19-country eurozone economy, which grew at a decade-high rate in 2017, pushed up another gear in the new year.

The services sector - which includes everything from banking to waiting tables - drew a reading of 53 in the month, down from the previous 54.2 in December.

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Chris Williamson, chief business economist at IHS Markit, said: "The pace of United Kingdom economic growth slowed sharply at the start of the year as January saw a triple-whammy of weaker PMI surveys".

"The pace of United Kingdom economic growth slowed sharply at the start of the year as January saw a triplewhammy of weaker PMI surveys", Williamson added. Service providers meanwhile registered a faster rise in cost burdens, with the rate of inflation the steepest since April 2012.

"The probability of a rate hike in May is now seen at close to 50:50".

The PMI reading for services, which accounts for roughly 80 per cent of United Kingdom output, also follows two similarly lacklustre readings last week for construction and manufacturing in January. No change in policy is expected, and also the MPC is likely to repeat its recent forward guidance, i.e. that further tightening in monetary policy will be required if the economy continues to develop in line with its expectations - and by extension - that another two to three rate hikes might be expected over the next two or three years.

China's private sector activity expanded at the fastest pace in seven years in January driven by accelerated rates of activity growth across both manufacturing and services.

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