British service PMI hits 50.6 in August

British service PMI hits 50.6 in August

Confidence among companies in the sector that includes hotels, restaurants and financial services dropped to the lowest level since July 2016, reflecting concerns about the impact of domestic political uncertainty.

Painting a downbeat picture for this quarter a new business sub-index that measures overall demand in the services industry fell sharply from a near three-year high in July of 53.9 to 51.0 last month, leading firms to increase hiring at a slower rate.

Some economists say surveys like the PMIs tend to overstate the extent of upturns and downturns, but they are nonetheless closely watched by the Bank of England as early indicators of moves in the wider economy. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, while a reading below 50 indicates an overall decrease.

"The weaker PMI readings for India's service sector match the trend noted in the manufacturing industry, bringing unwelcome news of a cooling economy halfway through the second quarter of fiscal year 2019-20", said Pollyanna de Lima, Principal Economist at IHS Markit.

With the U.K.'s path out of the European Union still unclear, and the prospect of a general election growing, IHS Markit's chief business economist said a rebound in activity is unlikely over coming months.

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Euro zone business growth was a touch faster than expected last month but remained lackluster as the bloc's dominant service industry only partially offset a slowdown in manufacturing, a survey showed on Wednesday.

IHS Markit said the composite PMI, barring any substantial change in September, pointed to economic growth of just 0.2% this quarter, matching the forecast in a Reuters poll. Growth lost momentum in both the manufacturing and service economies.

Business morale across the service sector worsened to hit its lowest level in nearly five years and the loss of confidence could slow down investment and job creation in coming months. The latest rise took the current stretch of job creation to two years and the pace of expansion remained above its long-run average, despite easing from July. Growth of aggregate new orders moderated from July and was modest. Private sector jobs rose further in August, but the pace of expansion was slower.

That way, PMI for manufacturing as well as services in August did not show any turnaround in the economy.