UK survey shows business activity rebounds in August

Hong Kong’s private sector showed signs of stabilising in August, with a key economic index marking the slowest contraction in the last 14 months, and analysts say the worst of the recent economic downturn may be over.

Speculators trimmed record high bets against the pound in the week ended Aug 30 and traders expect a further boost to sterling if United Kingdom services sector purchasing managers’ index beats expectations.

Business confidence has rebounded strongly in the United Kingdom following the initial shock of the vote to leave the EU.

Survey compiler IHS Markit flagged up higher export business linked to the weak pound, and higher domestic tourism in the mostly-warm summer months, as well as returning confidence following the initial Brexit hangover.

The most important news is a rebound in services activity, with the rise in the business activity index being the largest on record.

The revival marks a substantial improvement on the 0.4% quarterly rate of GDP decline indicated by the July survey data. Taken together the services and manufacturing PMIs for the two months point to third-quarter economic growth of about zero, he said.

The Markit/CIPS purchasing managers’ index showed activity in United Kingdom services saw its largest month-on-month rise in the survey’s history.

The pound rose 0.4% against the dollar following the update to 1.335 United States dollars.

“Inflationary pressures are also cooling amid intense competition, and hiring is on the wane as businesses grow more concerned about the outlook”.

Input price inflation rose to a 33-month record in August owing to the weak pound and rising fuel and labour costs.

“The numbers of in-house staff fell, however, as firms remained somewhat uncertain regarding the sustainability of the upturn in demand”, Lima said, adding a further uptick in backlogs may lead service providers to create jobs in coming months. The rise in factory gate prices was the steepest for five years.

The Bank of England cut rates to near zero early last month and launched an asset purchase to cushion the economy from the shock decision to leave the EU.

“However, although improving on July’s seven-year low, business confidence is still at one of its lowest levels seen over the past four years”, he added in comments accompanying the data.