U.K. services sector growth accelerates in February, PMI index rises to 51.5

U.K. services PMI index rose in the month of February, following the declines seen in the manufacturing and construction PMIs in the past week. The services PMI index rose to 51.5 from January’s 50.1. The outturn was against the consensus expectations of a fall to 49.9.

Still, it is worth noting that around these levels the services PMI continues to be well below its long-term average of 54.6, and considerably down on the levels seen in the past year, implying that overall sentiment in the service sector has weakened significantly. The IHS Markit survey respondents, in the commentary, noted that “Brexit-related uncertainty remained by far the most prominent factor acting as a brake on business activity growth in February”.

The details of the services report also underlined some disappointing trends. The new business orders component remained below the key 50 level for the second straight month, while the measure of new export business remained below 50 for the sixth straight month.

In the meantime, the measure of outstanding work also fell further below 50, implying a further fall in the work-in-hand. Less new business and a reduction in outstanding work does not augur well for the activity outlook in the months ahead, noted Lloyds Bank in a research report. Accordingly, companies reacted to this weaker backdrop by reducing staffing levels for a second straight month.

Still, the fact that much of the deceleration in business activity was attributed to ongoing political uncertainty implies that there is considerable scope for sentiment to improve, especially if the U.K.’s future with the EU becomes clearer.

“For now the pick up in the services PMI in February offset some of the downside weakness from the manufacturing and construction sectors, reported over the past week, to push the composite PMI to a four-month high of 51.5, from 50.3 previously. Nevertheless, according to Markit, these levels are consistent with quarterly GDP growth of just 0.1 percent”, added Lloyds Bank.

At 17:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at -27.1419, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 150.926 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex