The UK’s services sector growth decelerated in the previous month, with inflation in the sector plunging to a three-year low, new figures have revealed. The S&P Global UK services PMI survey registered at 52.9 in May, a dip from April’s 55.0.
This reading, aligning with economists’ forecasts, marks the most sluggish expansion since November of the prior year. A score above 50 signals growth in the services sector, whereas a score below indicates contraction.
The fresh data points to a slowdown in business activity and incoming orders, following an 11-month peak in April. Concurrently, input cost inflation for businesses dropped to its lowest since February 2021, leading to smaller price hikes for consumers.
Economists believe this deceleration in price increases could sway the Bank of England’s ratesetters as they contemplate a potential interest rate reduction later in the month. Joe Hayes, principal economist at S&P Global Market Intelligence, commented: “The PMI survey for May showed another reasonable rate of expansion in the UK service sector.”
He added, “Taken in tandem with our earlier-released manufacturing survey, the PMIs imply GDP (gross domestic product) growth of around 0.3 percent so far in the second quarter.”
Hayes also noted, “Of particular interest to the immediate outlook for the UK economy will be the prices measures, with the Bank of England potentially moving to cut interest rates as soon as this month.”
“The PMI surveys show prices for UK services rising at the slowest pace for over three years.”
Rob Wood, chief UK economist at Pantheon Macroeconomics, commented: “The PMI continues to suggest robust growth, despite slipping back in May.”
He also noted, “The big news in the May PMI, however, was further signs of easing inflation pressure.”
Wood concluded with an optimistic outlook, stating, “The PMI suggests April’s blowout services inflation print was a flash in the pan and should not be taken as a sign of strong annualised inflation continuing.”
