United Kingdom services growth picks up though warning signs cloud outlook

United Kingdom services growth picks up though warning signs cloud outlook

Economic activity in France rose at the sharpest rate in more than six years, and Spain saw its expansion improve from August's seven-month low. The index has held above the 50 line separating growth from contraction every month since October 2013.

The index is expected to fall to 55 in September from 55.1 in August.

"Looked at alongside the manufacturing PMI, the survey data point to GDP rising at an annualised rate of just over 2% in the third quarter".

"However, while optimism has slipped, the "hard" survey data on recent output, new orders and hiring trends remain solid".

The services PMI released today surprised to the upside, coming in at 53.6 in September, beating expectations that it would stay unchanged at 53.2.

But the survey also showed that growth in new business fell to the weakest in more than a year and a measure of executives' confidence declined.

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Paul Hollingsworth, senior United Kingdom economist at Capital Economics, said: "The rise in September's services sector PMI will help assuage fears that the economy is losing momentum, but it suggests that growth struggled to pick up pace in Q3". This was the first drop in construction activity in 13 months and the lowest reading since July 2016.

Looking ahead movement in the EUR GBP exchange rate later today will be dependent on the tone of Mario Draghi's speech this evening, with the Euro likely to tumble further if the ECB President signals that it may still be too early to discuss tightening monetary policy.

In contrast to the UK's flagging performance, the 19 countries in the eurozone continued to expand at a strong pace.

However, the United Kingdom still lags behind the eurozone, where services PMI grew strongly to 55.8 last month.

USA services sector activity strengthened further in September, a closely followed survey indicated on Wednesday, with a slight easing in the rate of growth that was expected due to disruption caused by hurricanes Harvey and Irma. However, despite having retreated by about 4.7% from August's 10-month highs due to sterling's BoE-led rally, the euro remains up 4% in the year to date against the British currency on the back of the diverging outlook for the two economies.

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