UK services activity expanded at the slowest pace in five months in February as cautious consumers curbed their spending in the wake of the Brexit-related uncertainty.
The headline services Purchasing Managers' Index dropped to 53.3 in February from 54.5 in January, survey data from the Chartered Institute of Procurement & Supply and IHS Markit showed Friday. This was the weakest expansion since September and stayed below the expected score of 54.0.
Nonetheless, the reading was above the 50.0 threshold that separates growth from contraction.
The survey showed that squeezed consumer finances and increased operating costs acted as a brake on new business growth. As a result, new business expanded at the slowest pace in five months.
Nonetheless, a moderate pace of job creation was maintained across the service economy in February. Additional staff intake was linked to long-term expansion plans and new product development.
Moreover, business confidence remained strong, with service providers indicating that optimism was little-changed from the post-referendum high recorded at the start of this year.
Driven by weaker currency, service sector cost inflation accelerated to its fastest for eight-and-a-half years in February.
The PMI surveys are collectively signaling GDP growth of 0.4 percent in the first quarter, Chris Williamson, chief business economist at IHS Markit, said.
Policymakers are likely to continue to stress the need to look through any further upturn in inflation and focus instead on the need to keep policy accommodative in the face of a likely further slowing in the pace of economic growth in 2017, he noted.
Paul Hollingsworth, a UK economist at Capital Economics, said there are a number of headwinds that are likely to continue to weigh on growth this year. However, he remained more optimistic than most about the ability of the UK economy to face these headwinds.
Looking ahead, IHS Markit Economist Howard Archer said he suspects that consumer services activity will be increasingly pressurized by consumers' purchasing power weakening over the coming months as inflation rises appreciably and earnings growth is muted.
For comments and feedback contact: editorial@rttnews.com
Economic News
What parts of the world are seeing the best (and worst) economic performances lately? Click here to check out our Econ Scorecard and find out! See up-to-the-moment rankings for the best and worst performers in GDP, unemployment rate, inflation and much more.
April 24, 2026 15:15 ET Economics news flow was relatively light this week even as the conflict in the Middle East continued, raising concerns for policymakers. In the U.S., spending data, initial jobless claims and pending home sales were the highlights. Business confidence in the biggest euro area economy was in focus in Europe. Inflation data from Japan gained attention in Asia.