TOP NEWS: High inflation continues to plague UK service sector

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The UK services sector saw its weakest performance for over a year in May as rising inflation dented customer demand, according to S&P Global on Tuesday.

The S&P Global-CIPS UK services purchasing managers' index printed 53.4 points in May, up from the preliminary reading of 51.8, but down sharply from 58.9 in April. The latest reading was the worst final tally since February 2021.

S&P said the May figure pointed to a difficult month for the UK service sector as business activity growth eased considerably since April and margins were squeezed again by rising inflation.

Survey respondents often noted that concerns about the economic outlook and heightened risk aversion had taken a toll on customer demand, it noted.

Further, S&P highlighted the latest reading was the weakest since February 2021 that mostly reflected subdued business and consumer confidence, while fears about the economic outlook also contributed to softer demand patterns in May.

The S&P Global-CIPS UK composite PMI print was 53.1 in May, down sharply from 58.2 in April. The composite figure is a weighted average of the services and earlier manufacturing print.

Tim Moore, economics director at S&P Global Market Intelligence, said: ‘May data illustrate a worrying combination of slower growth and higher prices across the UK service sector. The latest round of input cost inflation was the steepest since this index began in July 1996, while the monthly loss of momentum for business activity expansion was a survey record outside of lockdown periods.

‘Service providers are increasingly concerned about the near-term business outlook, with price resistance among consumers and escalating cost of living pressures set to dampen spending during the second half of 2022. Growth expectations have dropped in each month since the invasion of Ukraine and are now the weakest since October 2020.’

Last week Wednesday, figures showed the seasonally adjusted S&P Global-CIPS UK manufacturing PMI posted 54.6 points in May, unchanged from the earlier flash estimate and down from 55.8 in April.

The UK services PMI was compiled by S&P Global from responses to questionnaires sent to a panel of around 650 service sector companies, collected from May 12 to 27.

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