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UK Services Activity Expansion Slows As Employment Falls

UK Services Activity Expansion Slows As Employment Falls

Benjamin Spier, Technical Strategist

THE TAKEAWAY: UK PMI for services in September disappoints at 52.2 -> PMI signals little growth in Q3 -> Sterling trading unaffected

UK services activity continued nearly 2-straight years of expansion according to Markit’s September Purchasing Manager’s Index. However, the PMI for services dropped off from August’s 5-month high and disappointed expectations at 52.2. A PMI above 50.0 indicates an expansion in sector activity.

The UK services sector saw a solid gain in new business in September; a rise in business activity was largely due to an improvement in demand and a post-Olympics boost. A net fall in employment was seen in September, as companies were able to keep up with work orders with fewer workers.

Chief Markit Economist Chris Williamson said that the PMI adds to evidence that the UK economy barely grew in Q3. “GDP is likely to have grown by perhaps 0.1% as modest growth of services activity was offset by a slight drop in construction sector output and a steeper decline in manufacturing, according to the PMIs,” said Williamson.

However, the worse than expected PMI did not have a significant effect on trading of the British Pound. GBPUSD climbed back above 1.6100 shortly following the release. Support could be provided around 1.6110, by a 2-week downward trend line and a 2-month upward trend line.

GBPUSD 15-minute: October 3, 2012

UK_Services_Activity_Expansion_Slows_As_Employment_Falls_body_gbpusd.png, UK Services Activity Expansion Slows As Employment Falls

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