Data released by S&P Global/CIPS showed that activity growth in the UK private sector slowed in May, but exceeded economists' forecasts. Meanwhile, the rate of jobs growth accelerated to a four-month high, reflecting greater hiring at services firms.
The UK composite PMI fell to 53.0 points from 54.1 points in April. Economists had expected a drop to 52.8. Meanwhile, the services PMI declined to 52.9 points, as expected, from 55.0 points in April. The latest reading was the lowest since November 2023. However, both indices are above the 50-point mark, which indicates an expansion of activity in the sector, for the seventh month in a row.
"The PMI survey for May showed another reasonable rate of expansion in the UK service sector. Taken in tandem with our earlier-released manufacturing survey, the PMIs imply GDP growth of around 0.3% so far in the second quarter. 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," said Joe Hayes, Principal Economist at S&P Global Market Intelligence.
The report showed that new orders in the service sector rose again in May (for the seventh month in a row). Although, the rate of expansion slowed from April's near one-year peak amid reports of subdued overseas demand. The depletion in outstanding orders, albeit mild, quickened since April and was the fastest for three months. Nevertheless, the upward trend in UK service sector employment continued during May. In fact, the rate of job creation accelerated to the quickest since February. Greater employment levels coincided with another month of robust business confidence during May. UK services companies were strongly optimistic towards the year-ahead outlook, with growth expectations above their long-run average and ticking fractionally higher. Hopes for lower interest rates and an improvement in the domestic economy were reasons companies gave for their positive activity forecasts.