British Pound Drops as UK Services PMI Misses Target
- Author: Zachary Reyes Mar 03, 2017,
Mar 03, 2017, 18:45
Owing to slow recovery in demand, India's services industry bounced back in February after a four-month low, showed a private business survey.
Having said that, Chris Williamson, chief business economist at IHS Markit, said: "The burning question is whether the February slowdown merely represents some pay-back after a strong start to the year for United States businesses, or whether it's the start of a more entrenched slowdown".
The Markit/Nikkei Japan Services Purchasing Managers Index (PMI) slipped to a seasonally adjusted 51.3 in February from 51.9 in January.
The pound fell to a near-seven week low as Britain's powerhouse service sector suffered a slowdown amid cautious consumer spending and a steep rise in costs linked to sterling's collapse.
The country's manufacturing PMI for February, finished at 53.3, hit the highest since March 2014.
The Pound to Dollar exchange rate is at 1.2230, down 0.3%.
"With demand conditions strengthening in India, new business inflows rose in both sectors, leading to the first increases in private sector new work orders and output since October 2016". That's still well above the 50.0 threshold that separates growth from contraction, but it revealed business activity expanding at the slowest pace since September 2016, with growth momentum easing further from the 17-month peak seen at the end of 2016.
The latest readings of the electronics sector indicated a strengthening growth in the months ahead, and the sector reading has now expanded for the 7th consecutive month, the SIPMM said.
According to Markit, the PMI data is consistent with first-quarter Euro-zone GDP growth of 0.6%.
The reports suggest that rising concerns about potential upsets in coming euro zone elections, particularly the prospect of far-right leader Marine Le Pen posing a serious challenge for the presidency in France, are being shrugged off by the economy.
The pound fell to a near-seven week low against the U.S. dollar to trade at 1.222, and dropped 0.6% versus the euro to a near-one month low of 1.160.
Policymakers are likely to continue to stress the need to look through any further upturn in inflation and focus instead on the need to keep policy accommodative in the face of a likely further slowing in the pace of economic growth in 2017, he noted.