HomeContributorsFundamental AnalysisWeek Sterling Hits UK Services Sector In February

Week Sterling Hits UK Services Sector In February

‘The ongoing steep upturn in costs suggests that consumer-price inflation has significantly further to rise’. – Chris Williamson, Markit/CIPS

Activity in the British services sector, which accounts for almost 80% of the economy, dropped more than expected last month amid inflationary pressures linked to the weak Pound, a private survey revealed on Friday. Markit/CIPS reported its Purchasing Managers’ Index fell to 53.3 in February from 54.5 points seen in the preceding month, while market analysts anticipated a slight decrease to 54.2. Markit said that the latest PMI surveys were consistent with economic growth slowing to 0.5% in the Q1 of 2017 from the previous quarter’s 0.6%, in line with the Bank of England’s forecasts. Data suggested that the widely-expected Brexit economic slowdown finally started to hit the UK economy. Moreover, some analysts said that retail sales data, scheduled for the release on March 23rd, would probably paint even worse picture of the post-Brexit recession as the weak Sterling pushed prices sharply higher. Since the June 23 referendum, the Pound lost nearly 18% of its value. Back in February, input prices and prices charged by service providers advanced at the fastest pace in more than eight years.

After the release, the Pound dropped 0.4% against the US Dollar to trade at 1.2215, its seven-week low. Against the Euro, the Sterling fell 0.6% to trade at 86.16.

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