UK Private Sector Logs Further Expansion In May

The UK private sector continued to expand strongly in May, though the pace of growth eased from April’s one-year high as the downturn in the manufacturing sector deepened, flash survey results from S&P Global showed on Tuesday.

The flash Chartered Institute of Procurement & Supply composite output index dropped to a two-month low of 53.9 in May from 54.9 in April. The expected score was 54.6.

Nonetheless, any reading above 50 indicates expansion in the sector.

The Service Purchasing Managers’ Index, or PMI, also fell to a two-month low of 55.1 in May from 55.9 in the previous month. The reading was expected to fall marginally to 55.5.

At the same time, the manufacturing sector continued to remain in contraction in May and the corresponding PMI fell to 46.9 from 47.8 in April.

Thus, British economic growth cantered around the service sector in May, with travel, leisure and hospitality businesses widely commenting on resilient consumer demand.

In contrast, production levels in manufacturing firms were the weakest in four months, linked to subdued order books and customer de-stocking.

Growth in new orders in the private sector was the slowest in four months. New business from abroad was unchanged in May as improving sales in the service economy were offset by the sharpest drop in manufacturing exports for four months.

Employment in the private sector increased in May for the second consecutive month, but the job creation rate was marginal and notably weaker than on average in 2022.

On the price front, input price inflation in the private sector economy eased marginally in April, with overall cost pressures now the least marked since March 2021.

This downward slope in inflation was largely attributed to the fastest decline in cost pressures among manufacturing firms for just over seven years on the back of lower energy bills and raw material prices.

However, as a result of wage inflation, service providers experienced the most rapid increase in their cost burdens in three months.

“Regardless of the swings and roundabouts shown in the data, neither sector was particularly cheery about the next 12 months as the evident weaknesses in the UK economy remained obstacles to a clear pathway to full recovery,” John Glen, CIPS chief economist, said.

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