The latest survey from S&P Global/CIPS showed that business activity in the private sector declined in May, reaching a 2-month low, as a resurgence in manufacturing production supplemented a further, albeit slower, upturn in services output. At the same time, UK businesses reported the softest increase in average selling prices for over three years in May.
The UK composite PMI fell to 52.8 points from 54.1 points in April. Consensus estimates suggested a decrease to 54.0 points. The index remains above the 50-point mark, which indicates an expansion of activity in the private sector, for the seventh month in a row. The services PMI dropped to 52.9 points (6-month low) from 55.0 points in April, while the manufacturing PMI rose to 51.3 points (22-month high) from 49.1 points. Economists had expected the services PMI to drop to 54.7 points and the manufacturing PMI to rise to 49.5 points.
Data showed that new orders in the private sector rose again in May, but the rate of growth slowed to its weakest in the year-to-date and was relatively modest. The rise in new business was helped by a second successive increase in export orders, after April marked the first expansion in almost a year. The employment rate rose for the fifth month in a row in May, but the pace of growth was negligible. Some firms continued to report delays in hiring staff due to a shortage of candidates and cost considerations. As for the inflationary situation in the private sector, input price inflation dropped to its lowest level in seven months, reflecting softer rises in input costs across both sectors. Meanwhile, private sector firms increased their selling prices to a weaker extent for the third month running in May, leading prices charged inflation to fall to its lowest level since February 2021. Business activity forecasts for the next 12 months remained optimistic in May, although different trends were observed in the two main sectors. The degree of optimism among manufacturing companies has soared to its highest level since February 2022. At the same time, optimism among service companies fell to a four-month low.