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Sour mood in the UK service sector

Sour mood in the UK service sector

Business in Britain’s service sector shrank between June and August and confidence dwindled as firms reported a lack of demand, the Confederation of British Industry (CBI) reported, suggesting that any recovery from recession will be long and arduous. Furthermore revised economic data on Friday revealed worrying underlying trends with a large drop in net trade (sharp fall in exports and strong growth in  imports) and a decline in household spending and investment.

The Greek Prime Minister, Antonis Samaras, has been seeking an extension of up to two years for the necessary austerity reforms required for further eurozone bailout funding. Despite supportive comments from German Chancellor, Angela Merkel, on Friday it has been made clear that any decision would depend on the next Troika report due in late September. The euro lost momentum with the news that no immediate support for Greece would be forthcoming.

Meanwhile, the ongoing improvement in household confidence may prop up the U.S. dollar as it dampens the Fed’s scope to expand its balance sheet further. Although the Fed minutes heightened speculation for another large-scale asset purchase program, the central bank may preserve its current policy over the medium-term as the world’s largest economy gets on a more sustainable path.

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