UK Services PMI Rose to 3-Month High in May

Jun 05, 2018 - Activity in the UK service sector picked up at the fastest pace in three months in May, continuing to recover from March’s recent low, according to a closely watched business survey released on Tuesday.

Research firm Markit said its services purchasing managers’ index rose to 54.0 in May from 52.8 in April, compared to forecasts for a reading of 52.9.

The latest reading was the highest since February and signalled a solid upturn in overall business activity across the service economy. Firms cited a catch-up from the snow-related disruption seen in the first quarter of 2018, alongside sustained growth of incoming new work.

But new business volumes continued to rise at a relatively subdued rate, with firms noting that Brexit-related uncertainty remained a key factor holding back decision making among clients. At the same time, tight labor market conditions placed upward pressure on staff wages and difficulties recruiting skilled staff.

Employment in the sector increased at the second-slowest pace since March 2017, the report said.

“The improvement in service sector activity adds to evidence that the economy is on course to rebound in the second quarter but, like the earlier manufacturing and construction surveys, raises questions about the outlook”, said Chris Williamson, chief business economist at survey compiler Markit.

“So far, the three PMI surveys indicate that GDP looks set to rise by 0.3-0.4% in the second quarter.”

A similar survey of the manufacturing sector on Friday showed that activity picked up in May for the first time in six months, but the underlying trend remained weak, while another report on Monday showed that construction activity growth remained subdued last month.