UK service sector activity rose at an accelerated rate during May as new business increased at the sharpest pace for over three years. Furthermore, amid evidence of marginal capacity pressures and with positive expectations for the coming year, companies added to their payroll numbers for the fifth consecutive month.
Figures from the Office for National Statistics (ONS) Index of Services (IoS) also showed service sector output had risen at its sharpest pace since March 2012 with growth rates based on weighted data covering accommodation & food services, transport, storage, information & communications services, finance, real estate, professional, admin & support services, and other service sectors.
The headline seasonally adjusted Business Activity Index for the Markit/CIPS UK Services PMI, which covers transport & communication, financial intermediation, business services, personal services, computing & IT and hotels & restaurants, remained firmly above the 50.0 no-change mark during May to signal a fifth consecutive month of service sector growth. Moreover, reaching 54.9, up from April’s 52.9, the index signalled a rate of growth that was the sharpest since March 2012.
Underpinning the increase in activity was a combination of higher sales volumes, promotional activities and new product launches. A number of companies also reported that better weather had supported growth. This factor also helped drive the sharpest rate of new business growth since February 2010, although improved market conditions were also widely mentioned. Panellists noted an increased willingness amongst clients to commit to new business. Sales have now risen for five successive survey periods.
Chris Williamson, chief economist at survey compilers, Markit, said:
“The UK economy has moved up a gear with all cylinders now firing. For the first time in a year, manufacturing, services and construction sectors are all now reporting higher levels of activity. The resulting overall pace of growth in May was the fastest since March of last year, having now accelerated for three successive months.”
David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, added:
“The biggest surge in new business for three years in the dominant services sector could trigger hopes that a recovery is finally here. This was underlined by the sharpest growth in activity in over a year and increased confidence for the year ahead. Improved market conditions and even better weather, also had a positive effect.”