Data released by S&P Global/CIPS showed that activity in the UK services sector increased significantly in April, reaching the highest level since April 2022, helped by the strongest growth in new orders since March 2022.
UK Services PMI rose to 55.9 points in April from 52.9 points in March. Economists had expected an increase to 54.9 points. The index remains above the 50-point mark, which indicates an expansion of activity in the sector, for the third month in a row. Survey respondents often noted that stronger consumer spending was a factor boosting business activity during April, especially those operating in the travel, tourism and leisure sub-sectors.
The report also showed that new orders grew at the fastest pace in 13 months, helped by an improvement in domestic demand and another increase in export sales. Service providers cited greater numbers of international arrivals and a general recovery in demand from EU and US clients. Meanwhile, employment growth accelerated in April, and was the highest since September 2022. Nevertheless, service providers continued to report tough labor market conditions, with difficulties finding suitably qualified candidates compounding wage pressures. Overall, higher wages were the most frequently cited reason for increased business spending in April, followed by higher energy prices. About 48% of respondents reported an increase in production costs, and only 3% reported a decrease. In addition, the overall pace of purchasing inflation accelerated for the first time since November 2022. A combination of stronger demand and rapidly rising business expenses led to a faster rate of prices charged inflation during April. About 34% of service sector firms noted an increase in their average prices, compared with just 5% who indicated a decrease. The data also pointed to continued optimism among service sector companies about their growth prospects for the coming year, with the corresponding index reaching its highest level since March 2022. More than half of the survey participants (52%) expect an increase in business activity over the coming year, while only 12% predict a decline.