UK services sector expands in May, price pressures ease

5th Jun 2024 07:16

(Sharecast News) - The UK's services sector continued to expand last month, a closely-watched survey showed on Wednesday, although the pace of growth eased.

The latest S&P Global UK services PMI business activity index came in at 52.9, the seventh successive month it has been above the neutral 50.0 level. A figure above 50.0 indicates growth while one below it suggests contraction.

However, May's reading was down on April's 11-month high of 55.0.

Respondents attributed May's output growth to stronger sales, with new business volumes rising again during the month.

There was also a slight pick-up in both jobs growth and business confidence, while input cost inflation fell to its weakest since February 2021. Input costs jumped in April after the increase in the national living wage pushed up labour costs.

New orders fell back slightly from the 11-month high seen in April, however. Respondents noted there had been a softer rise in demand, particularly from overseas customers.

The S&P Global UK composite PMI, a weighted average of comparable services and manufacturing indices, eased to 53.0 from April's one-year high of 54.1.

Joe Hayes, principal economist at S&P Global Market Intelligence, said: "Taken in tandem, the PMIs imply GDP growth of around 0.3% so far in the second quarter.

"The survey shows prices for UK services rising at the slowest pace for over three years; that's now three months on the trot that selling price inflation in the sector has eased. This will be very encouraging to the Monetary Policy Committee."

Peter Arnold, UK chief economist at EY, said: "Though still above the 50.0 no-change mark, May's weaker composite PMI reading is consistent with the EY Item Club's view that the UK is set to see a slower pace of quarter-on-quarter growth in the second quarter.

"On the inflation front, May's services survey reported that input costs rose at their slowest pace for three years. Together with evidence of a further slowdown in prices charged inflation, this is consistent with the idea that services inflation will continue to cool through the summer."

The data were collected between 9 and 29 May, with surveys sent to a panel of around 650 service sector firms.