UK’s services PMI for January records its best reading since September 2018

IHS Markit revealed the United Kingdom’s services purchasing managers’ index (PMI) on Wednesday that reported new orders to have surged to the highest since mid-2018.

The index was recorded at 53.9 in January up from 52.9 that was posted last month. Analysts were expecting the UK’s services PMI to remain unchanged in January. Printing above 50.0, the index suggested that the UK’s economy is slowly catching pace following the general election on December 12^th which speeded up the country’s departure from the European Union.

GBP/USD Climbed To 1.3060 Following The Economic Data

Wednesday’s reading was also branded the strongest since September 2018. Following the economic data, Sterling was seen gaining traction in the forex market. GBP rose to around 1.3060 level against the greenback.

Wednesday’s data added to the post-election improvement in economic growth that the Bank of England had cited last week to justify its decision of keeping rates unchanged. IHS Markit echoed a similar opinion as it reiterated that the UK’s economy is expected to grow at 0.2% (in line with the target) in the first quarter of fiscal 2020.

In terms of new business in the services sector, the survey highlighted growth at its fastest pace since 2018’s June. Despite the rising optimism, the road ahead can be expected to be a bumpy one for the United Kingdom. While it has successfully exited the European Union on January 31^st, the UK now has to strike a broader trade deal with the EU before the current deadline of December 2020 in order to avoid increased tariffs on its goods. The deadline, however, as per the experts, may turn out to be too short for a trade deal to be finalized between the two parties.

Business Expectations Sub-Index Records Its Best Since May 2015

According to PM Johnson, the UK and the EU can sign a similar deal as the EU already has with Canada. If not, he has expressed agreement towards the EU’s basic terms that it has with Australia. The latter approach, however, is widely unacceptable for business groups, as per the reports. But all of this is going to be an issue in the future. For now, analysts highlight, that the signs of economic growth in the UK are getting evident.

The business expectations sub-index climbed to its best since May 2015 in January. It was further accentuated that despite businesses starting to celebrate, consumer response in the UK remains weak. Retails sales in the UK were reported to have fallen sharply in December while a 7% drop in car sales was recorded in January as compared to last year.

The UK’s composite PMI was revealed at 53.3 in January up from December’s 49.3. The reading marked the best since September 2018.