UK service sector growth slows to three-month low amid rising political jitters

The UK's all-important services slowed down in May, as rising inflation and political jitters soured the mood in the industry, a survey released on Monday (5 June) by IHS Markit Economics showed.

Markit's Purchasing Managers Index (PMI) for the services sector fell to a three-month low of 53.8 last month from 55.8 in April, the highest level on record this year. The figure was also lower than the 55 reading analysts expected but remained above the 50 threshold that indicates expansion for the tenth consecutive month.

Despite slower growth in May, Britain's economy appears to have regained some momentum in the second quarter and there are hopes GDP could grow 0.5% in the three month-period.

However, ongoing concerns over Brexit and rising inflation, which has squeezed households' budgets, could still pose a threat to growth.

"Optimism about the year ahead is running below the long-run average, weighed down principally by concerns over Brexit, political uncertainty and weaker spending by households," said Chris Williamson, chief business economist at IHS Markit.

"However, at the moment firms generally remain upbeat and very much in expansion mode: the employment indicators from the three PMI surveys are consistent with around 30,000 private sector jobs being added each month."

Input costs inflation, however, eased to an eight-month low, leading to the weakest rise in prices charged by service sector firms since November 2016.

Separate reports released last week showed Britain's manufacturing sector slipped back from a three-year high in April, but still showed robust growth buoyed by a weak pound and rising export orders.

Markit's manufacturing PMI fell to 56.7 in May from 57.3, compared with analysts' expectations for a 56.5 reading and marking the tenth consecutive month of expansion.

Meanwhile, the construction sector performed much better than expected in May, recording the sharpest rate of increase in 17 months. The construction PMI stood at 56 last month, compared with analysts' expectations for a 52.6 figure and with the 53.1 reading recorded in April.