The UK's private sector economy continued to expand in May, driven by a resurgence in manufacturing, albeit at a slower-than-anticipated rate, according to preliminary survey data released by S&P Global on Thursday.
The composite output index fell to 52.8 in May, down from April's 12-month high of 54.1, missing the forecasted score of 54.0. Nonetheless, a reading above 50.0 still signals growth in the private sector.
The increase in British private sector activity was largely spurred by a robust rebound in manufacturing output, with the PMI rising to a 22-month peak of 51.3, up from 49.1 in the previous month.
Service sector activity also continued to expand in May, bolstered by heightened business and consumer spending. However, the growth rate slowed to its lowest level in six months, with the services purchasing managers' index (PMI) dropping to a six-month low of 52.9 in May from 55.0 in April.
Growth in new orders within the private sector has decelerated to its lowest pace this year. Both services and manufacturing sectors experienced moderate increases in new orders, while new export orders rose for the second consecutive month.
Despite ongoing output growth, the UK economy saw a subdued labor market in May, with employment levels rising only marginally. Some companies continued to face delays in hiring due to candidate shortages and cost concerns.
On the pricing front, input price inflation eased to its lowest level in seven months, reflecting slower increases in input costs across both manufacturing and service sectors. Consequently, selling price inflation also dropped to its lowest point since February 2021.
Looking ahead, business activity projections for the upcoming year remain optimistic, despite differing trends in the two main sectors.
"With companies now reporting the slowest price growth in over three years and headline inflation falling close to target, the PMI data support the view that the Bank of England will start cutting interest rates in August, provided the data continue to move in the right direction over the summer," said Chris Williamson, chief business economist at S&P Global.
