British services sector growth declines to slowest since September 2016
Output from the massive British services sector grew at the slowest pace since September 2016, according to a closely watched survey.
The purchasing managers’ index for the services sector declined from 54.2 in December to 53 points in January, according to data firm IHS Markit – well below the 54.3 reading expected by economists. A reading above 50 indicates an expansion in the sector.
Firms saw a slight increase in the inflow of new business, although it remained below the average pace of new clients seen during 2017, with uncertainties around the Brexit process reported as a major factor holding back growth.
Read more: Britain’s services sector enjoys welcome uptick in growth
However, the balance of services firms expecting activity to increase over the next 12 months rose to its highest level since March, in a more promising sign.
Sterling dipped after the data was released, although it remained within the range of trading earlier in the day.
A “triple-whammy” of poor data from the services, construction and manufacturing sectors suggests the UK economy will slow to growth of under 0.3 per cent in the first quarter, according to Chris Williamson, chief business economist at IHS Markit.
He said: “Service sector expansion slid to a 16-month low, reflecting a marked waning in growth of demand for business and consumer-facing services such as hotels and restaurants. Demand for transport and communication services was down for the second straight month.”
Read more: Economists await a tale of two economies in the UK and Europe
The UK data contrasted to the much stronger growth seen in the Eurozone, where the services expansion boomed to a PMI of 58, above expectations and a strong increase on the previous month.
Overall Eurozone economic growth jumped to near a 12-year high, according to a composite measure of the different industries.
The weaker UK data should provide pauseto the Bank of England’s rate rise plans, after a recent increase in investor expectations of a hike in May, according to Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
Read more: Bank of England set to hold rates on Super Thursday