Upswing in UK services firms points to renewed economic growth, PMI survey shows

Reuters

Published May 03, 2024 10:09

(Reuters) - British services companies reported the strongest upswing in activity in almost a year during April, despite a new surge in cost pressures, according to a survey on Friday that pointed to a solid rate of economic growth.

The S&P Global UK Services Purchasing Managers' Index rose in April to 55.0, its highest level since May 2023 and up from a preliminary reading of 54.9. Readings above 50 represent expansion.

The survey showed a robust increase in new orders, but also the biggest acceleration of cost pressures since August - something that is likely to be noticed by Bank of England officials who next week will meet to set interest rates.

Many businesses attributed the inflation squeeze to a 10% increase in the national minimum wage in April, while some also said rising salary costs were a reason why employment growth slowed to its lowest level this year.

"The latest survey results are consistent with the UK economy growing at a quarterly rate of 0.4% and therefore pulling further out of last year's shallow recession," said economics director Tim Moore from S&P Global Market Intelligence.

Relief at a turnaround in the economic outlook was commonly cited as a factor supporting sales pipelines in April. However, there were also reports that clients remained somewhat risk averse and under pressure from elevated inflation.