Growth in UK services companies suggests a return to economic expansion

According to a poll released on Friday, British services businesses reported the biggest increase in activity in over a year during April, despite a fresh uptick in cost pressures. The study also indicated a high rate of economic growth.

From a preliminary reading of 54.9 in April, the S&P Global UK Services Purchasing Managers' Index increased to 55.0, its highest point since May 2023. Expanding is indicated by readings over 50.

The poll revealed a sharp rise in new orders together with the largest acceleration of cost pressures since August. This is likely to be noted by officials from the Bank of England when they meet next week to decide on interest rates.

A 10% hike in the federal minimum wage in April was blamed by many firms for the inflation pinch. Some also claimed that growing compensation expenses were the cause of the job growth slowing to its lowest point of the year.

In April, sales pipelines were often supported by relief at a turnabout in the economic outlook. Reports also indicated, meanwhile, that customers were still under pressure from high inflation and were rather risk-conservative.

In contrast to the manufacturing PMI, which fell back below the 50-point threshold in March after briefly entering the growth zone, the leading services are seeing increasing fortunes.

The services PMI on Friday, along with the preceding factory survey, is included in the composite PMI, which reached a one-year high of 54.1 from 52.8 in March.

(Sources: investing.com, reuters.com)