LONDON (Reuters) – Growth among British businesses slowed sharply in May to its weakest since early 2021 when the country was under a COVID-19 lockdown, according to a survey, although the loss of momentum was less severe than initially reported.
The composite S&P Global/CIPS Purchasing Managers Index – spanning services and manufacturing firms – slumped to 53.1 from 58.2 in April, the lowest since February 2021, as Britain’s economy felt the hit from accelerating inflation.
The final PMI reading represented an improvement on the initial “flash” reading of 51.8.
The PMI for the dominant services sector fell to 53.4 from 58.9 in April to show its biggest month-on-month fall since the survey began in 1996, although the final reading was up from the flash reading which also stood at 51.8.
Tim Moore, economics director at S&P Global Market Intelligence, said May’s figures painted a picture of slower growth and higher prices across the services sector with input and output costs rising by the most since records began in 1996.
“There were bright spots in customer-facing parts of the economy during May, buoyed by a rapid recovery in consumer spending on travel, leisure and entertainment,” Moore said.
“However, hospitality businesses widely reported constraints on recovery from a lack of candidates to fill vacancies and difficulties meeting demand due to ongoing global supply chain disruption.”
The Bank of England is worried about further price pressure from the labour market and recent COVID-19 lockdowns in China. With inflation at 9.0% in April, almost five times its target, the BoE has raised interest rates four times since December and has said it is likely to increase them again.
Moore said service providers feared consumers would balk at paying higher prices, pushing down spending later this year.
Separate data published earlier on Tuesday showed British shoppers cut their spending in May by the most since early 2021.
Last month finance minister Rishi Sunak bowed to calls for fresh support for households struggling to cope with the jump in inflation, led by a surge in household energy tariffs.
(Writing by William Schomberg; Editing by Toby Chopra)
