UK service sector sees strongest growth in a year

The UK service sector saw its fastest growth in a year in April, according to a survey released on Thursday.

The S&P Global/CIPS purchasing managers’ index for the sector rose to 55.9 from 52.9 in March, coming in above the first estimate of 54.9. This marked the fastest rate of growth since April last year.

Survey respondents said that stronger consumer spending was a factor boosting business activity, especially those operating in the travel, tourism and leisure sub-sectors. There were also reports citing a turnaround in demand for business services, despite pressure on budgets from intense cost inflation.

Meanwhile, the composite PMI increased to 54.9 in April from 52.2 the month before. This was above the initial estimate of 53.9.

Tim Moore, economics director at S&P Global Market Intelligence, said: "A strong rate of service sector growth meant that the UK economy started the second quarter of 2023 in positive fashion. Overall private sector output expanded at the fastest pace for one year, despite another fall in manufacturing production during April."

However, he also warned that while the growth outlook has improved considerably for the service economy, "a swift rebound in customer demand appears to have reignited inflationary pressures".

"Both input costs and average prices charged increased at faster rates in April, which service providers overwhelmingly attributed to greater staff wages. Some 34% of the survey panel reported a rise in their prices charged in April, which was around three times higher than the pre-pandemic average."