UK private sector growth slows in May

UK private sector growth slowed in May, according to a survey released on Tuesday.

The flash S&P Global/CIPS composite purchasing managers’ index - which measures activity in the manufacturing and services sectors - fell to 53.9 in May from 54.9 in April, falling short of expectations for a reading of 54.7.

A reading above 50.0 indicates expansion, while a reading below signals contraction.

The services PMI business activity index declined to 55.1 from 55.9, coming in below consensus expectations of 55.3.

Meanwhile, the manufacturing PMI fell to 46.9 in May from 47.8, below consensus expectations for a reading of 48.0.

The survey found that economic growth remained centred on the service sector, with travel, leisure and hospitality businesses widely commenting on resilient consumer demand. However, manufacturing firms indicated the steepest reduction in production levels for four months.

Spending is being diverted away from goods to services, and many companies are winding down their inventories, exacerbating the downturn in demand and driving output and prices lower.

"The UK is therefore seeing a tale of two economies, with the divergence between manufacturing and services posing difficulties for policymakers," said Chris Williamson, chief business economist at S&P Global Market Intelligence.

"However, it's the far larger service sector that will typically dictate policy, meaning these survey results are nothing but hawkish in suggesting the Bank of England has more work to do to quash stubbornly high inflationary pressures in the services economy."