Britain's crucial services sector grew slower than expected in May

pulse

June 5, 2017 9:54 AM

IHS-Markit's PMI came in at 53.8 for May. Economists had been expecting a reading of 55.0, down from 55.8 in April.

The service sector covers everything from waiting tables to banking.

LONDON — Britain's crucial services sector grew slower than expected in May.

Data provider IHS-Markit said on Monday that services PMI, a measure of expected growth in the sector, came in at 53.8 for May. Economists had been expecting a reading of 55.0, which itself would have been a slowdown from 55.8 in April.

PMI is given as a number between 0 and 100. Anything below 50 signals contraction in the sector, while anything above 50 means growth. Therefore, the higher the number the better.

IHS-Markit said it is seeing "a renewed slowdown in business activity growth across the UK service economy, following the four-month peak achieved in April."

The company blames "squeezed household budgets and, in some cases, delayed decision making among clients ahead of the General Election."

Britain's service sector covers everything from waiters in coffee shops to bankers advising on takeover deals. It accounts for a huge chunk of the economy, with the Office for National Statistics saying that 79% of UK GDP came from services in 2013.

Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply (CIPS), which sponsors the PMI survey, say in the release: "The powerhouse driving UK GDP lost some of its force this month, with the weakest performance since February, revealing a fragility out of sync with the other sectors which were fired up and running.

Last week IHS-Markit's construction PMI showed better than expected growth in the sector, while manufacturing activity also remains "resilient."

Brock says: "It was clear that slower new business growth let the side down, impacted by caution around the General Election, and a tightening of purse strings. Not even stiff competition between businesses absorbing higher prices for food and the effects of the National Living Wage, could tempt consumers to spend."

Data from IHS-Markit earlier on Monday morning showed the strong German economy powering the eurozone to its highest growth in 6 years. Overall economy growth in Germany came in at 57.4 for May, beating expectations. Eurozone-wide growth hit 56.8.

However, French economic growth and Italian service sector growth came in below forecasts.

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