UK services slowdown casts cloud over economy

Bloomberg

Britain’s services growth weakened more than expected at the start of the year, casting a cloud over the economy following some recent positive figures.
IHS Markit’s Purchasing Managers Index fell to 53 in January from 54.2 in December. That’s the lowest since September 2016 and well below the 54.1 economists had forecast.
Along with reports showing a slowdown in manufacturing and a near-stagnation in construction, Markit said the gauges suggest economic growth has slowed “sharply.” They come just days before the Bank of England’s latest policy decision, when it will also update forecasts that are key to the outlook for interest rates. The disappointing PMI readings are in contrast to data showing the economy expanded 0.5 percent in the fourth quarter and employment growth was far stronger than anticipated.
That had sparked a shift in expectations about UK interest rates, with investors raising bets on a hike as early as May. But the PMI survey may somewhat temper that.
“The January slowdown pushes the all-sector PMI into dovish territory,” said Chris Williamson, chief business economist at IHS Markit. “With the survey also indicating weaker upward price pressures, the data therefore cast doubts on any imminent rise in interest rates.”
IHS Markit said the weakness in services was led by consumer- facing firms such as hotels and restaurants, and demand for transport and communication services fell. While confidence overall remained positive, some respondents said they were being “stymied by Brexit-related uncertainty,” and others noted a deterioration in productivity.