- UK's services PMI beats analysts' estimate but remains in contraction for third consecutive month.
- Brexit uncertainty and the UK's upcoming general election cited as reasons for contraction.
- UK's quarterly economic contraction rate is at 0.1%.
- GBP/USD broke above the crucial resistance at 1.30 and is currently trading at 1.3051.
Owing to the uncertainty circling the UK’s upcoming general election and Brexit at large, the services sector noted contraction in November that marks the third month in a row without expansion. A figure under 50 is taken as a standard that represents contraction. The United Kingdom services sector purchasing manager’s index (PMI) remained capped at 49.3 in November.
IHS Markit Reports The UK’s Final Services PMI At 49.3 In November
According to the IHS Markit survey, the UK’s services PMI beat the analysts’ estimate of 48.6 in November but remained under 50 (49.3) to mark continued contraction. The services sector PMI was reported at 48.6 in October. The revised figure later in October, however, was highlighted at 50. Nonetheless, the United Kingdom has failed to top the 50 mark for services PMI to step into expansion since August. A continuous contraction spanning over three consecutive months marks the longest streak for the services sector since 2009.
Economist Tim Moore of IHS Markit commented on the report earlier on Wednesday and stated that the service providers are choosing to delay decisions on major projects until the uncertainty revolving the Brexit events fades away.
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The economic data for business activity in the United Kingdom was also recorded in contraction earlier this week. The UK’s economy at large, however, is playing a minimal role in the elections campaign, as per the experts. The analysts have further added that the UK’s post-Brexit relationship with the EU and promises of boosting public services spending remains in focus for the UK’s upcoming general election.
UK’s Quarterly Economic Contraction Rate Is At 0.1%
The United Kingdom has a reputation of the fifth largest economy in the world. The current quarterly rate of contraction in the UK’s economy is 0.1%. The decline, however, is lower than the flash estimate of 0.2%.
November’s report highlighted the fastest contraction in new orders since July 2016, following the first Brexit referendum that narrowly favored departure from the European Union. However, since the final services PMI for the United Kingdom recorded better than expected figure for November, the response in the forex market was reported largely positive. With a gain of around 0.50% for the day, GBP/USD is currently trading at 1.3051.
Cable was seen trading at around 1.2980 level earlier this morning. Following the report, the currency pair caught steam and broke above the long-held crucial resistance at 1.30 level. Having broken the resistance, further upward rallies can be expected in the currency pair, as per the forex analysts.