UK Services PMI drops to 50.6 in August vs. 51.0 expected (GBP pares gains)

The UK Services sector activity slowed further its pace of expansion in August, the latest survey report from Markit Economics showed this Wednesday.

The headline seasonally adjusted IHS Markit/CIPS UK Services PMI Index fell to 50.6 in August vs. 51.4 booked in the previous month while missing expectations of 51.0.

Key Points:

Weaker rises in business activity and new work.

Margins squeezed by sharpest cost inflation since.

Growth projections drop to lowest since July 2016.

Chris Williamson, Chief Business Economist at IHS Markit, which compiles the survey, noted:

"Business activity in the service sector almost stalled in August as Brexit-related worries escalated, curbing spending by both businesses and consumers. So far this year the services economy has reported its worst performance since 2008, with worrying weakness seen across sectors such as transport, financial services, hotels and restaurants, and business-to-business services.”

"After surveys indicated that both manufacturing and construction remained in deep downturns in August, the lack of any meaningful growth in the service sector raises the likelihood that the UK economy is slipping into recession. The PMI surveys are so far indicating a 0.1% contraction of GDP in the third quarter.”

GBP/USD extended its retreat from two-day tops of 1.2165, now trading near 1.2140 region on downbeat UK Services sector activity numbers.