UK services sector activity rose at an accelerated rate during May as new business increased at the sharpest pace for over three years. Amid evidence of marginal capacity pressures and with positive expectations for the coming year, companies added to their payroll numbers for the fifth consecutive month.
Meanwhile, latest price data showed that cost inflation maintained a downward trend, hitting a one-year low. Competitive pressures led to a slight fall in average output charges.
The headline seasonally adjusted Business Activity Index remained firmly above the 50.0 no-change mark during May to signal a fifth consecutive month of service sector growth. Moreover, reaching 54.9, up from April’s 52.9, the index signalled a rate of growth that was the sharpest since March 2012.
Underpinning the increase in activity was a combination of higher sales volumes, promotional activities and new product launches. A number of companies also reported that better weather had supported growth. This factor also helped drive the sharpest rate of new business growth since February 2010, although improved market conditions were also widely mentioned. Panellists noted an increased willingness amongst clients to commit to new business. Sales
have now risen for five successive survey periods.
The positive trend in new business placed some marginal pressure on capacity during May, with backlogs of work rising slightly for the second successive month. The back-to-back increase in work outstanding was the first since a six-month growth sequence ended in September 2007 and service providers reacted by raising their staffing levels for the fifth month in succession.
Although modest, growth of employment was the sharpest for three months, with additional staff not only recruited to deal with current workloads but also in anticipation of growth in the coming months.
The Markit/CIPS UK Services PMI (Purchasing
Managers' Index) covers transport & communication, financial intermediation,
business services, personal services, computing & IT and hotels & restaurants
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