UK economy begins to lose momentum due to service sector dip

Economy - Mohit Shah - Mar 07,2017

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uk economy begins to lose momentum due to service sector dip

In February, slower consumer spending hampered the service companies that has started to pour a negative effect on the UK economy which unexpectedly grew strong after June’s Brexit vote.

According to a major business survey, Britain’s economic growth which surged strongly after the Brexit vote in June might hit a downhill track as inflation starts to pick up.

Slower consumer spending is seen as one of the prime issues which have worried service companies in February.

The Markit/CIPS purchasing managers' index (PMI) for services dropped to 53.3, significantly lower from 54.5 in January.

Chris Williamson of IHS Markit said the economy which showed remarkable growth at the end of the previous year has now “lost momentum”.

According to official figures, inflation was marked at 1.8% in January, however, Mr. Williamson said until next year the rate is estimated to hit 3%.

Moreover, sterling dipped to a seven-week low against the U.S. dollar right after the PMI announcement. The drop was recorded to be 0.3% against the dollar to reach $1.2233. Also, the sterling was 0.5% lower against the euro stuck at 1.1621.

As per UK economist at Capital Economics, Paul Hollingsworth, the economy is surrounded by a number of “headwinds” such as higher inflation and doubts regarding the “future relationship with the EU”.

He also added the country it very optimistic to endure the situation with expectations of 1.8% GDP growth in 2017 along with a 2.5% progress in 2018.

According to economists, Britain’s economy swelled quite faster as compared to the other developed countries in the world, but now the rising inflation rate is starting to burden business profit margins along with the consumers.

Prime Minister Theresa May is aiming to trigger the formal process for Brexit by the end of this month, which would create a new picture for the UK economy.