A recent survey revealed a noticeable slowdown in growth among British businesses this month, exceeding economists’ predictions. The S&P Global UK Composite Purchasing Managers’ Index for the services and manufacturing sectors dipped to 52.8 in May from 54.1 in April, falling below the anticipated 54.0 mark.
Meanwhile, despite both sectors showing expansion with readings above 50, the services sector experienced its weakest growth in six months, outweighing a recovery in factories.
The data suggests a weakening momentum in the UK economy following a strong start in 2024 after emerging from a shallow recession. This presents challenges for Prime Minister Rishi Sunak’s Conservative Party, particularly as economic competence is central to their campaign against the opposing Labour Party.
S&P Global indicated that economic output growth is likely to slow to 0.3% quarterly from the previous 0.6% in the first quarter, with new orders expanding at a slower pace.
According to Chief Business Economist Chris Williamson at S&P Global, the PMI data could prompt the Bank of England to consider interest rate cuts in August if economic indicators continue in this direction.
Although investors delayed expectations for a rate cut after April’s inflation data, optimism remains for a potential rate adjustment by August, with full market pricing not projected until November.
In May, the services PMI dropped to 52.9 from the previous month’s 11-month high of 55.0, falling short of the Reuters poll consensus of 54.7. Conversely, the manufacturing PMI rose to 51.3, its highest level since July 2022, driven by increased output and new orders.
