Confidence in the UK’s key services sector improved in January, but manufacturers and retailers remained gloomy despite expectations of a post-election bounce.
Sentiment in the services sector rose to minus 4.9 in January, from minus 15.7 in the month before, hitting its highest level in a year according to data from the European Commission. Services account for about 80 per cent of the British economy.
The data come in the hours before one of the most uncertain Bank of England rate decisions in years, with markets split over whether policymakers will cut interest rates for the first time since 2016.
“Our hunch is that upbeat recent survey evidence will be enough to tip the balance on the Monetary Policy Committee in favour of keeping interest rates on hold at noon,” said Andrew Wishart, UK economist at Capital Economics.
Sentiment in the retail sector dropped to minus 21.8 in January from minus 15.6 in December, close to its lowest in a decade. A negative measure indicates a majority of businesses reporting worsening activity.
Manufacturers’ morale remained downbeat, only marginally rising to minus 19.5 in January, from minus 22 in December and compared to 2.3 in the same month last year. The January figure remains close to the decade-low registered in September.
The election result and the diminished political uncertainty resulted in only a small rise in consumer confidence to minus 6.5.
“The election result clearly has not boosted consumer sentiment as much as business confidence” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.