Data released by S&P Global/CIPS showed that activity growth in the UK private sector accelerated in April, exceeding economists' forecasts. In addition, the latest reading signaled the fastest expansion since April 2023.
The UK composite PMI rose to 54.1 points from 52.8 points in March. Economists had expected an increase to 54.0. Meanwhile, the services PMI rose to 55.0 points (the highest reading since May 2023) from 53.1 points in March. Consensus estimates suggested an increase to 54.9 points. Both indices are above the 50-point mark, which indicates an expansion of activity in the sector, for the sixth month in a row.
"Service providers benefited from improving business and consumer spending in April as more favorable demand conditions underpinned the greatest improvement in activity since May 2023. The latest survey results are consistent with the UK economy growing at a quarterly rate of 0.4% and therefore pulling further out of last year's shallow recession," said Tim Moore, Economics Director at S&P Global Market Intelligence.
The report showed that new orders in the service sector grew at the fastest pace in 11 months. Meanwhile, new export orders also grew strongly (the fastest pace since March 2023) amid ongoing reports of strengthening sales to clients in the US and Asia. However, the latest data signaled a marginal fall in backlogs of work, while employment growth slowed to a 4-month low. In some cases, subdued recruitment simply reflected difficulties finding suitable candidates to fill vacancies, whereas other firms noted that elevated wage pressures had acted as a constraint on job creation. As for the inflationary situation, the increase in purchase prices accelerated to an 8-month high, while the overall rate of charge inflation eased to its lowest since April 2021. There were reports that competitive pressures had constrained pricing power and led to some promotional discounting. Service providers meanwhile remained upbeat about business activity prospects for the year ahead, with around 54% anticipating a rise and only 10% predicting a decline.