Pound rises as UK services PMI shows surprise rise in January
The UK's services sector showed stronger growth than expected in January, Markit's purchasing managers' index showed today.
The index showed a reading of 55.6, against expectations of 55.4 (any number above 50 denotes expansion). That caused the pound to spike 0.14 per cent against the dollar, rising to $1.4448, with economists suggesting the surprise jump will be good news for first-quarter GDP growth.
But Markit warned the 12-month outlook for services, the UK's dominant sector, was at its weakest in three years.
"Firms mentioned sales campaigns, new products and new business lines as reasons for optimism, but there were also concerns around a global economic slowdown and heightened uncertainty at the start of 2016.
“The economy defied expectations and picked up speed in January, but cracks continue to appear in the country’s resilience to the various headwinds," said Chris Williamson, chief economist at Markit.
“The three PMI surveys for January collectively point to a slight upturn in the rate of economic growth, consistent with GDP rising at a quarterly rate of 0.6 per cent in the first quarter, up from 0.5 per cent in the fourth quarter, if current levels are sustained.
"However, order book backlogs are already falling at the fastest rate for almost three years and companies have scaled back their hiring in response to growing uncertainty about the economic outlook at home and abroad."