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UK CommentPMIs signal weaker start to 2018

  1. Services PMI down to 53.0 in January from 54.2 in December (consensus 54.1)
  2. Sentiment pulled down by current business, while future expectations stay upbeat
  3. PMI composite down to 53.5 in January, the weakest level since August 2016
Services PMI down to 53.0 in January from 54.2 in December (consensus 54.1)
The UK Services PMI fell to 53.0 in January from 54.2 in December and disappointed the consensus expectation of 54.1. The PMI Composite fell to 53.5 in January from 54.9 in December, versus 54.6 expected. Services sentiment was pulled lower by decelerating growth in current business activity, with services output rising at the slowest pace since September 2016. Incoming new business, on the other hand, improved a little on December, but has still been on a downward trend since the end of 2016 and is currently weaker than its historical average. According to the survey, output growth was curtailed by the loss of existing clients and lingering concerns surrounding the UK’s exit from the EU. However, despite the deterioration in sentiment, future business expectations improved further in January. Sentiment was reportedly boosted by planned increases in capex, advertising efforts and greater market shares. Also, job creation picked up as companies retained positive outlook expectations. Contrary to the manufacturing and construction sector surveys, price pressure, although still high, eased in the services sector in January as costs showed the smallest rise in 16 months. Furthermore, output price inflation was said to be curbed by competitive conditions.
PMI composite down to 53.5 in January, the weakest since August 2016
The fall in the PMIs for construction and manufacturing together with the weaker-than-expected services sentiment suggests a notable slowing of momentum for the UK economy at the start of the year. Taken together, the PMI composite index is at its weakest since August 2016 and suggests, based on past form, that GDP growth could deteriorate from a quarterly pace of 0.5 percent in Q4 to around 0.3 percent in Q1.




Kari Due-Andresen

Chief Economist Norway

Norway and UK

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