-Chris Williamson, Markit
Business activity in the British services sector improved markedly in the last month of 2016, according a private survey published on Thursday. Markit reported that its Purchasing Managers' Index for the country's services sector, which accounts for more than 75% of the UK economy, climbed to 56.2 in December, following the previous month's 55.2 points and surpassing analysts' expectations for 54.8. This was the fastest rate of growth recorded since the middle of 2015. Despite the stronger than expected December reading, companies are likely to raise their prices to offset the post-Brexit drop in the value of the British Pound that fell around 20% against the US Dollar since the EU referendum. According to Markit, the weak Sterling sent food and fuel prices soaring, as well as pushed costs for plastic packaging, IT and wages. Markit also stated that the UK economy probably expanded at an annualized pace of 0.5% in the last quarter of 2016, ignoring the Brexit vote and slightly easing from 0.6% in the previous quarter. However, analysts widely expect UK growth to drop sharply in 2017. According to the latest projections, UK economic growth is predicted to slow to 1.1% during this year amid higher inflation and investment cuts. Back in August, the Bank of England cut its key interest rate to a record low of 0.25%, signaling further possible cuts.
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