The Markit / CIPS Purchasing Managers’ Index, the survey of the UK’s services sector, dropped unexpectedly in February, with the reading falling to 53.3, down from 54.5 in January. The services sector accounts for almost 80% of the UK’s output, and the sector has been responsible for the vast majority of the UK economy’s growth since the EU referendum last June. The CIPS Index covers a range of sectors including hotels, firms which provide business services and IT. Economists had expected the Index to give a reading of 54.1 in February.
The decline in growth of services reflects similar surveys from the manufacturing and construction industries, which showed that inflationary pressures from the rising cost of imported goods have negatively impacted on these economies. The slowdown of economic activity growth in February is seen by Markit, the financial data provider which compiles the surveys, as indicating that the UK economy had lost momentum after the initial expansion of the economy, following the Brexit vote. Markit further commented that, despite this, “business confidence nonetheless remained strong, with service providers indicating that optimism was little-changed from the post-referendum high recorded at the start of this year”.
Meanwhile, the Office for Budget Responsibility will publish its updated GDP forecasts for the UK next week, when Chancellor of the Exchequer Philip Hammond delivers the Government’s Budget to the House of Commons.