- Howard Archer, IHS Global Insight's chief economist
As usually, during the first week of each month the U.K. is posting data from all key pillars of the economy, including manufacturing, services and construction activity indexes. While Monday's report surprised markets to the upside, construction sector was not able to push the Sterling higher. As construction sector accounts for only about 7% of the economy, the market reaction was limited, whereas Wednesday's services PMI is likely to add more turbulence into financial markets.
A report from Markit Economics showed that a gauge of activity in the construction sector decelerated to 62.6 in February following January's reading of 64.6 that was the highest level in more than six years. Analysts expected a figure of 63.2. Even despite the deterioration, the activity still remains rather strong, with the index being far away from the contraction zone. Britain has recorded the wettest winter for more than 250 years, as rainfall in some of the regions was almost 2 1/2 times the monthly average. As always the central bank has already claimed that flooding will affect the near-term outlook, also saying the impact will be short-lived and will not have an impact on the central bank's actions. Despite strong growth in manufacturing sector and still impressive performance of the construction sector, the BoE projects are growth of 0.9% in the first quarter after the recovery broadened in the final three months of 2013.
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