UK services PMI jumps to 3-month highs in May, a big beat

The services sector activity in the UK economy extended its rebound in the month of May, and came in much stronger than the consensus forecast, a fresh report from Markit Economics showed on Tuesday.

The services PMI jumped to 54.0 in May versus a 52.8 reading booked in April. Markets predicted an expansion to 53.0 last month.

Key Points:

Service sector growth continues to recover from March’s recent low.

New work expands at relatively subdued pace.

Sharp rise in input costs, driven by higher fuel bills and staff salaries.

Chris Williamson, Chief Economist at Markit, noted: “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. So far, the three PMI surveys indicate that GDP looks set to rise by 0.3- 0.4% in the second quarter.”

“However, disappointing inflows of new work suggest that growth could wane in coming months as Brexit-related uncertainty continues to weigh on spending decisions and dampen business confidence. Measured across all major parts of the economy, new orders growth in the second quarter so far is running at the weakest since the third quarter of 2016.”