U.K. services activity slowed unexpectedly

Note: This section contains information in English only.
Source: Dukascopy Bank SA
"However, even with the easing seen in January, the sector is still expanding at a rate that bodes well for another strong GDP reading in the first quarter. Taken together, the three PMI surveys are signaling quarterly GDP growth of 0.9 per cent."
- Chris Williamson, chief economist at Markit 

The U.K. economy cannot be so strong as it is projected, as its key sector unexpectedly slowed in January, suggesting first quarter's growth can disappoint markets. The Sterling fell 0.23% to 1.6286 soon after the report, breaking through the important support level at 1.63 that was expected to hold the pair for the foreseeable future, however, a dip below this level puts 1.6223 on the map. 

An index based on a survey complied by Markit Economics turned lower to 58.3 last month from 58.8 a month earlier, hitting the lowest level in eight months. Analysts, however, expected a figure of 59.2. Despite a deceleration the index is still comfortably above the 50 mark that separates growth from contraction. Another alarming sign for the U.K. policymakers is the fact capacity is coming under pressure, with backloads of work rising for a 10th straight month in January– the highest rate since May 1997. Additionally, a gauge of business confidence stood at the highest since March 2010, with further intentions to step up on hiring and investment. 

The services sector accounts for about 78% of the overall economic activity, and the latest data showed it still remains the strongest pillar of the domestic economy, as the output expanded 0.8% in the final quarter. Contributing around 0.7% to the quarterly GDP. The latest economic projections are speaking in favour of sustained growth rates during 2014. 

© Dukascopy Bank SA

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