UK ser­vices in­dex plunges to low­est in al­most 3 years

The Pak Banker - - 6BUSI­NESS -

LON­DON: A U.K. ser­vices gauge dropped in Fe­bru­ary as con­cerns about global growth, mar­ket volatil­ity and the pos­si­bil­ity of a Bri­tish exit from the Euro­pean Union rat­tled the big­gest part of the econ­omy.

The Pur­chas­ing Man­agers In­dex pub­lished by Markit Eco­nomics on Thurs­day fell to 52.7 -- the low­est since March 2013 -- from 55.6. Economists had fore­cast a read­ing of 55.1, and the weak re­sult fol­lows dis­ap­point­ing re­ports on man­u­fac­tur­ing and con­struc­tion that sug­gest eco­nomic growth could slow to 0.3 per­cent this quar­ter from 0.5 per­cent.

The sur­veys may alarm Bank of Eng­land pol­icy mak­ers, who have so far main­tained that "Brexit" fears have not hit growth and that the U.K. is well-in­su­lated from global tur­moil. Nev­er­the­less, Gover­nor Mark Car­ney said last week that of­fi­cials have scope to loosen mon­e­tary pol­icy if needed, in­clud­ing cut­ting in­ter­est rates.

"The ex­tent of the slow­down will be a shock to pol­icy mak­ers" and "puts to bed any talk of the Bank of Eng­land rais­ing in­ter­est rates," said Markit econ­o­mist Chris Wil­liamson. "The fo­cus will in­stead in­creas­ingly shift to whether pol­icy mak­ers may soon need to dig deeper into their tool­box."

The pound fell af­ter the data and was trad­ing at $1.4049 as of 9:40 a.m. in Lon­don, down 0.1 per­cent.

The sur­vey "com­pletes a triple-whammy of dis­ap­point­ing sur­vey news for Fe­bru­ary" and there are still "down­side risks" to the 0.3 per­cent es­ti­mate for the first quar­ter, ac­cord­ing to Wil­liamson.

Markit's man­u­fac­tur­ing sur­vey ear­lier this week showed fac­to­ries had their worst month in al­most three years last month and a gauge of con­struc­tion fell to a 10-month low. With ser­vices now show­ing signs of weak­en­ing, Wil­liamson said the econ­omy's "main en­gine of growth is at risk of stalling."

Com­pa­nies are "un­set­tled by con­cerns re­gard­ing the in­creased risk of 'Brexit,' fi­nan­cial mar­ket volatil­ity and weak eco­nomic growth at home and abroad," he said.

After fall­ing to a three-year low in Jan­uary, busi­ness con­fi­dence edged up last month, but re­mains at a level that "his­tor­i­cally pre­saged an im­mi­nent slow­ing in the econ­omy to near stag­na­tion or worse in com­ing months," Wil­liamson said.

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