Brexit effects may reflect in business surveys
Index provider IHS Markit will release PMI surveys for British manufacturing, construction and services on Monday, Tuesday and Wednesday respectively, with official data for manufacturing and construction output for February due to follow on Friday.
Economists polled by Reuters expect the PMI for the dominant services sector to tick up to 53.5 in March from February’s five-month low of 53.3. That reading suggested faltering consumer spending was starting to bite and pointed to first quarter economic growth of around 0.4 per cent — compared with 0.7 per cent in late 2016.
“UK PMIs for March, especially once combined with the February industrial production, construction and trade data should leave us with a very good feel for 1Q (first quarter) GDP by the end of the week,” Morgan Stanley economists wrote.
“Overall, we expect the data point to some slowing in 1Q.”
Official data on Friday showed the services industry, which accounts for about two-thirds of Britain’s economy, contracted in January for the first time since March last year.
Other recent data suggested consumers are more cautious.
British households’ to has also becoming declining spending power — real disposable income suffered the steepest quarterly drop in three years in OctoberDecember — led them to run down their savings to a record low in late 2016.
Sterling’s fall since the Brexit vote has kept manufacturing activity near 2½ years highs since the turn of the year, but recent surveys have suggested higher input prices are hitting new orders in the construction sector. The pound has lost nearly a fifth of its value against the dollar.
Manufacturing accounts for around 10 per cent of the British economy, with construction making up another 6 per cent.
Britain’s economy last year defied forecasts that it would slow sharply after the referendum decision to leave the EU, instead expanding faster than most of its developed world peers.