Stronger orders drive India's Jan services growth to 3-month high

Jeannie Matthews
February 5, 2018

The headline IHS Markit services PMI fell to 53 in January, down from 54.2 in December and missing forecasts of a rise to 54.3. It was forecast to fall to 54.0.

Earlier on Monday, the EY Item Club thinktank, which uses the Treasury's economic model, lifted its 2018 forecasts for United Kingdom growth to 1.7% from its previous 1.4% as it felt the economy is "over the worst".

Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, examined the data's relevance to the Bank of England's current interest rate policy stance.

Growth was reportedly curtailed by the loss of existing clients and lingering concerns surrounding the UK's exit from the EU.

The seasonally adjusted Nikkei Services Business Activity Index improved to 51.7 in January, up from 50.9 in December, signalling a faster expansion.

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Indian service providers addressed new business inflows and rising backlogs by expanding workforces for the fifth consecutive month in January.

India's economy is predicted to grow at a four-year low of 6.6 percent this fiscal year ending in March, according to a Reuters poll last month. "Demand for transport and communication services was down for the second straight month", Chris Williamson, IHS Markit's chief business economist said in a statement.

"The January decline pushes the all-sector PMI down into dovish territory as far as Bank of England monetary policy is concerned, historically consistent with a loosening bias". "With the survey also indicating weaker upward price pressures, the data therefore cast doubts on any imminent rise in interest rates". Moreover, the rate of job- creation was the fastest since last September.

That had sparked a shift in expectations about United Kingdom interest rates, with investors raising bets on a hike as early as May.

Paul Hollingsworth at Capital Economics remained upbeat, however. "Brexit uncertainties remain significant, while the squeeze on consumers remains appreciable at the start of 2018".

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