Market Analysis

In April, British service companies experienced a significant upswing in activity, marking the strongest performance in nearly a year, despite facing heightened cost pressures. 

The S&P Global UK Services Purchasing Managers' Index climbed to 55.0, its highest level since May 2023. This uptick in activity was fueled by robust growth in new orders, though it coincided with the most pronounced acceleration in cost pressures since August. This trend is likely to catch the attention of Bank of England officials who are scheduled to convene next week to discuss interest rates.

The increase in costs was attributed to various factors, including a 10% rise in the national minimum wage in April and escalating salary expenses, which contributed to a slowdown in employment growth, reaching its lowest level this year.

According to Tim Moore, economics director at S&P Global Market Intelligence, these survey results indicate that the UK economy is expanding at a quarterly rate of 0.4%, indicating a steady recovery from the previous year's mild recession.

While there is relief over the improving economic outlook, some businesses noted that clients remained somewhat risk-averse and were feeling the pressure of elevated inflation.

The positive performance of the services sector contrasts with the manufacturing PMI, which fell back below the 50 mark after briefly entering growth territory in March.

The composite PMI, which combines the services PMI with the earlier factory survey, rose to 54.1 from 52.8 in March, reaching a one-year high.

Paraphrasing text from "Investing" all rights reserved by the original author.