- U.K. Services Sector Expands Amid Rising Uncertainty
The U.K. Services sector surprisingly grew at a faster pace in September.
The services Purchasing Managers Index rose to 53.6 in the month, according to the IHS Markit report released on Wednesday. Up from 53.2 in August.
However, new business investment fell to the lowest in more than a year and so did business confidence. Meaning investors were holding off on projects in all the key sectors, manufacturing, construction and services, because of growing uncertainty.
This, weak investment and low business confidence dragged the all-sector gauge to a seven-month low in September, and according to Markit that is the level normally associated with loose monetary policy.
“The rise in price pressures will pour further fuel on expectations that the Bank of England will soon follow-up on its increasingly hawkish rhetoric,” Williamson said. “However, the decision is likely to be a difficult one.”
This is because policymakers are faced with the need to stimulate the economy and at the same time curb rising consumer prices amid weak currency. Weak wage growth, declining manufacturing and construction sectors will weigh on economic growth and worsen the Bank of England’s monetary position if interest rates were to be raised.
Overall, this is a mixed report, the simultaneous weak economic growth rate and rising prices present a challenge to the policymakers ahead of November meeting. The continuous rise in prices is expected to boost headline inflation to about 3 percent in September from 2.9 percent in August.
In another news, PwC said the U.K. economy probably grow at a 0.3 percent rate in the third quarter. If so, it will be the worst performing economy among the group seven nations for the second consecutive quarter in a row.
The Pound initially gained against the U.S. dollar to top yesterday’s high at $1.3287 before retracing to $1.3232.