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Stronger orders drive January services growth to three-month high: PMI

Stronger orders drive January services growth to three-month high: PMI

After zooming to a five-year high in December at 54.7, the Nikkei Manufacturing Purchasing Managers' Index or PMI fell to 52.4 last month as the base effect wore off. A number above 50 indicates an expansion in activity, while a figure below that points to a contraction.

Chris Williamson, chief business economist at IHS Markit, said: "The pace of United Kingdom economic growth slowed sharply at the start of the year as January saw a triple-whammy of weaker PMI surveys".

"That said, the overall performance of the service sector remained weaker than the long-run growth trend", she said.

The services PMI came in at 54.7 at the start of the year compared to 53.9 in December.

The dominant services sector undershot expectations in January, confirming an impression of a slowing wider United Kingdom economy in early 2018.

The pace of growth has slowed sharply since the start of the year, with surveys revealing that the economy has suffered a "triple whammy".

Oil prices sink as United States stock market slumps and dollar strengthens
Inventories are reported with a two-month lag, so by the time they have reached the five-year average, OPEC may be late to react. The investment bank said Brent likely will average $75 a barrel over the next three months, up from an earlier forecast of $62.

Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, examined the data's relevance to the Bank of England's current interest rate policy stance.

"The composite PMI continues to signal a bullish outlook for GDP growth in the Eurozone", Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics said in an email.

He added that the hit to services sector expansion reflected "waning" growth in demand for businesses and consumer-facing services like hotels and restaurants, while transport and communications also suffered a drop in market appetite for the second month running.

Suchita Dutta, executive director of the Indian Staffing Federation (ISF), said the second half of the fiscal usually sees spike in job numbers in the e-commerce, healthcare and hospitality sector due to festive season.

"[The data] strengthen the case for the Bank to take a lengthy pause before raising interest rates again; we see the next hike coming in August".

That, coupled with the government's plan to increase spending for rural areas and support farmers in its federal budget, could push up inflation and prompt the central bank to raise interest rates sooner-than-expected.

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