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The purchasing managers index for services dropped to a 2 1/2-year low in January, IHS Markit said in a survey, falling more sharply than economists had forecast. Companies said they were less likely to start new projects and that clients were spending more cautiously because of a lack of clarity around Britain’s departure from the European Union. [...]
Chris Williamson, chief business economist at IHS Markit, said the economy is “at risk of stalling or worse as escalating Brexit uncertainty coincides with a wider slowdown in the global economy.”
Still, as the PMI is based on a survey, it may be overstating the nature of the slowdown, as it did after the 2016 EU referendum. Consensus forecasts are currently for 0.3 percent growth this quarter, based on responses before the latest PMI.
The report follows disappointing Markit surveys on manufacturing and construction for January and comes just days before the Bank of England publishes its latest policy decision on Feb. 7. The central bank, which has long warned of the damage from Brexit to investment, will also publish new forecasts for growth and inflation.
The services report showed that new business volumes declined for the first time in 2 1/2 years, employment fell and optimism in the sector was close to the lowest levels in a decade.