Services sector sees fastest growth in 3 months in January: PMI

Jon Howard
February 6, 2018

Growth in Britain's dominant services sectors dipped in January as lingering concerns over the UK's withdrawal from the European Union continued to sap demand.

The index remained above the 50 threshold that separates expansion from contraction for the 16th consecutive month.

The PMI survey, which is compiled by IHS Markit and is considered to be one of the best indicators of growth, showed the balance for the services dropping from 54.2 in December to 53 in January.

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.

The index for new business rose to 52.2 from 51.1 in the previous month, and the rate of growth accelerated for the first time since October.

With a PMI of 50.5 in January, he believes that the economy will sustain a 5.5% growth rate in 1H18 from an expected gross domestic product growth of 5.7% in the fourth quarter of 2017.

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Combined with last week's weaker-than-expected surveys for the manufacturing and construction sectors, Monday's report suggested the world's sixth-biggest economy grew last month at its slowest pace since shortly after the Brexit vote in 2016.

The PMI survey produced a reading of 53 in January, against a reading of 54.2 in December.

Suchita Dutta, executive director of the Indian Staffing Federation (ISF), said the second half of the fiscal usually sees spike in job numbers in the e-commerce, healthcare and hospitality sector due to festive season.

The inflation in input prices in the services industry rose by its steepest level since April 2012 in January, the survey showed.

"[The data] strengthen the case for the Bank to take a lengthy pause before raising interest rates again; we see the next hike coming in August".

"Our latest study shows lower price pressures, which also raises doubts about the upward interest rates on the central bank", says IHS Markit economist, Chris Williams.

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