LONDON: Growth in Britain’s key services sector appears to have slowed, raising doubts about the economy’s ability to bounce back from the weak start to the year.
The key Purchasing Managers Index for May fell to 56.5, down from 59.5 in April. That was well above the 50 that marks expansion, but the weakest reading for four months.
David Noble, chief executive of the Chartered Institute of Procurement and Supply, said: “Momentum in the sector stalled in May, with the drop in the headline index the biggest fall for almost four years and likely to cause concern as services remains the UK’s largest driver of economic growth.”
Growth in the UK economy slowed to just 0.3% in the first three months of the year. Many analysts had blamed temporary factors – such as pre-election uncertainty –and were expecting an improvement in the current quarter.
However, with services making up about two-thirds of economic output, Chris Williamson, chief economist at data provider Markit, which carries out the PMI survey, warned that the latest reading indicated continued weakness.
Recent weakness in manufacturing and construction has spread to services. The surveys point to GDP growing at a quarterly rate of just 0.4% in May, raising doubts about the ability of the economy to rebound convincingly from the weakness seen at the start of the year.”
Jeremy Cook, chief economist at World First, said a slowdown in services was particularly concerning, because with real wages finally rising after stagnating for several years, services firms, from hairdressers to architects, should be benefiting from consumers’ increased spending power.
The service sector is still expanding at a decent clip but has come down from the elevated levels seen so far this year. This is a little bit concerning given the movements that we have seen in real wages in the past few months. The services sector is where additional disposable income should be being spent,” he said.
The survey also brings the PMI closer into line with recent data from the Office for National Statistics, which suggested a weakening in the pace of services growth.
