U.K. service sector sentiment survey shows mixed signals, services growth to rebound in Q3

The U.K. CPI Quarterly Services survey released on Tuesday reported that in the past three months confidence amongst several sectors of the services economy was mixed. The business sector seems to have performed comparatively strong, with the volume of business rising at the most rapid rate since May 2016. Business optimism was on balance positive, although considerably lower compared to 2013-2015 levels, and the higher rate of activity growth was expected to be maintained in the next three months. In the meantime, consumer services experienced optimism dropping after two straight quarters of growth.

The decline most likely reflected rising costs, and squeezed profit margins, while softer demand is also expected to have contributed to the deterioration. Household consumption had barely expanding in the second quarter. But business volume growth was just slightly weaker than in the earlier three months and interestingly, respondents project a higher rate in the coming three months. However, consumer services are expected to be driven by consumer sentiment and disposable income growth on the demand side, while labor shortages and reluctance to invest against a lack of clarity in the Brexit negotiations would dampen supply, stated Daiwa Capital Market Research.

“Therefore, in Q3 we would not expect to see a further pick-up in services growth from the 0.5 percent Q/Q seen in Q2”, added Daiwa Capital Market Research.

At 18:00 GMT the FxWirePro's Hourly Strength Index of British Pound was bullish at 81.5725, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -13.6485. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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