Growth in the UK's services sector accelerated sharply in April, according to the latest survey data, helping to drive growth in the private sector overall amid a slump in manufacturing.
The S&P Global/CIPS services PMI index rose to 55.9 points in April from 52.9 in March, the fastest rise in activity for 12 months, and higher than the flash estimate of 54.9.
Buoyant demand for services boosts new orders and activity growth in the #UK. (#PMI at 55.9; Mar: 52.9). Demand resilience and greater wage costs add to #inflationary pressures in the service economy. Read more: https://t.co/TJyHbtTxUE pic.twitter.com/uhbDk6NeIc
— S&P Global PMI™ (@SPGlobalPMI) May 4, 2023
"Service providers experienced the steepest upturn in new work for 13 months as resilient consumer spending combined with a turnaround in demand for business services to boost overall order books," said Tim Moore, economics director at S&P Global Markets Intelligence.
The survey noted that stronger consumer spending was a factor boosting business activity during April, especially those operating in the travel, tourism and leisure sub-sectors while there were also reports citing a turnaround in demand for business services, despite pressure on budgets from intense cost inflation.
More than half of the survey panel (52%) expect an increase in business activity during the year ahead, while just 12% predict a decline.
The degree of optimism has increased in each month since last November, supported by resilient consumer spending and improving confidence regarding the global economic outlook.
Martin Beck, chief economic advisor to the EY ITEM Club, felt the survey "will have sent a hawkish signal to the MPC ahead of next week's meeting."
He highlighted that respondents reported a rise in employment growth and tight labour market conditions, compelling employers to increase pay contributing to an acceleration in output price inflation.
"With recent official labour market and inflation releases telling a similar story, it's almost certain that the MPC will raise Bank Rate by a further 25bps in its May meeting,” he said.