- U.K. Non-manufacturing Expands Less Than Projected
The U.K. services sector expanded slightly in June as the economy shows signs of weak momentum.
The services’ Purchasing Managers Index plunged from 53.8 in May to 53.4 in June, according to the data released by IHS Markit on Wednesday. This is the least expansion recorded in four months but above the 50 level that divides expansion from contraction.
This was after IHS Markit reported on Monday that the manufacturing sector slowed to a three-month low of 54.3 in June. Also, consumer spending that has been supporting the economy plunged in May more than projected to 1.2 percent after inflation rate eroded the purchasing power of consumers.
All these, further showed the economy is slowing amid political uncertainty that shifted power to the European Union and likely to compel the U.K. to ease on certain terms the Prime Minister Theresa May has vowed not to compromise during the ongoing Brexit talks.
However, the Bank of England remained optimistic and has advised commercial banks to set aside as much as £11.4 billion to curtail future economic slowdown as the embattled nation look to spend its way out of slowing economy amid weak wage growth and low investments.
Chris Williamson, IHS Markit economist said the risks are now tilted towards “the economy slowing in the third quarter.”
“Exports have failed to provide sufficient support to offset weak consumer spending even with the weak pound, while low business spending and investment weighed on new job creation and wage growth,” said Samed Olukoya, a foreign exchange research analyst at Investors King Ltd.
“Therefore, it is unlikely that the Bank of England will hike rates anytime soon,” he added.