FTSE 100 Tumbles As Services PMI Disappoints

Posted February 06, 2018

"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 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".

Strength in both the manufacturing and services industries supported the Caixin China Composite Output Index, which covers both manufacturers and service providers, to jump to a seven-year high of 53.7 in January, from 53.0 in December.

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

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Services sector output rose at its slowest pace since September 2016, adding to the disappointment over similar PMI manufacturing and construction sector surveys.

The downbeat economic data comes ahead of Thursday's Bank of England Monetary Policy Committee vote, which is expected to hold interest rates at 0.5 per cent.

Williamson said that the January numbers were signalling a United Kingdom growth rate of "just under 0.3 per cent" for the first quarter of 2018, which would mark a slowdown from 0.5 per cent in December. The index stood at 50.9 in December 2016.

Britain's economy grew faster than expected at the end of 2017, and financial markets have put a 50-50 chance on a BoE rate hike in May.

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But Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin Insight Group, suggested that downside risks remain due to signs of moderating demand for manufactured products and rising costs that weigh on service companies.

"Having been the strongest in four years in November, input price inflation stabilised at a relatively weak level in January, while businesses increased their charges at a slightly faster rate", said the report.

There has been an upsurge in the Indian service sector with it expanding in January. "With the survey also indicating weaker upward price pressures, the data therefore cast doubts on any imminent rise in interest rates".

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