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UK private sector growth slowed markedly in May, estimates on Tuesday showed, succumbing to inflationary pressures and geopolitical worries.
The latest S&P Global/CIPS flash composite purchasing managers' index fell to 51.8 points in May, from April's final tally of 58.2. Should May's final figure land at 51.8, it would represent a 15-month low.
A figure above 50.0 denotes expansion, so the flash number suggests that while the UK private sector remains in positive territory, growth has slowed.
‘UK private sector firms signalled a sharp slowdown in business activity growth during May as escalating inflationary pressures and heightened geopolitical uncertainty acted as constraints on customer demand,’ S&P Global explained.
‘Latest data indicated the fastest rise in operating expenses since this index began in January 1998, led by a rapid acceleration in input cost inflation across the service economy. Concerns about squeezed margins and weaker order books resulted in a considerable drop in business expectations for the year ahead. This index signalled the lowest private sector growth projections since May 2020.’
The composite figure is calculated using a weighted average of the manufacturing and services reading.
The flash manufacturing PMI weakened to 54.6 points in May, from the final tally of 55.8 in April, signalling a 16-month low.
The services PMI slumped to a 15-month low of 51.8 points, from 58.9 in April.
In services, ‘economic and geopolitical uncertainty had contributed to a slowdown in client demand,’ S&P Global said.
‘However, many businesses in the travel, leisure and events sector still commented on strong growth conditions due to a rapid recovery from pandemic restrictions,’ S&P Global added.
Manufacturing output growth was the ‘joint-weakest’ since October 2021.
‘Goods producers typically commented on growth headwinds due to supply chain disruption, the war in Ukraine and rising inflation,’ S&P Global explained.
Data were collected between May 12 and May 20. Final survey data for manufacturing is reported on June 1, before the composite and services readings together on June 7.
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