Britain's dominant services sector unexpectedly perked up in July, a major survey showed on Monday, but this did little to shift fears that Brexit risks and US-China trade tensions are pushing the economy close to recession.
The IHS Markit/CIPS UK Services Purchasing Managers' Index (PMI) rose to a nine-month high of 51.4 from 50.2 in June, above all forecasts in a Reuters poll of economists that had pointed to an unchanged reading.
Despite the improvement, the services PMI stands well below its long-run average and a composite PMI also including last week's weak manufacturing and construction numbers only just rose above the 50 mark that divides growth from contraction.
Services account for about 80% of British economic output, though the UK PMI does not cover retailers or public services.
A PMI for the euro zone services sector fell short of expectations but still beat its British equivalent.
"We expect growth below trend until Brexit is resolved, but see a robust labour market and resilient consumer - reflected in today's modest beat," Morgan Stanley economists Jacob Nell and Bruna Skarica said.
The Bank of England expects official data on Friday to show growth in the world's fifth-largest economy slowed to zero in the three months to June, as the boost from premature Brexit preparations in early 2019 fades. The start of the third quarter looks little better, with worries mounting that Prime Minister Boris Johnson is seriously considering taking Britain out of the European Union on October 31 without a transition deal, risking major economic disruption.
Even without a chaotic Brexit, the BoE sees a one-in-three chance the economy will be shrinking in year-on-year terms by early next year. Car sales fell to their lowest since 2012 in July, adding to woes for a sector that says it will be one of the hardest hit by a no-deal Brexit that would sever pan-European supply chains.
Comments
Comments are closed.