Growth across UK business dips in May, in early blow to Sunak, PMI survey shows

[May 23, 2024]  By Andy Bruce
 
 LONDON (Reuters) - Growth across British businesses has cooled noticeably this month and by more than any economist polled by Reuters had predicted, a survey showed on Thursday, in an early blow for Prime Minister Rishi Sunak's election campaign.  

A general view of the financial district of London is seen in London, Britain, October 19, 2016. REUTERS/Hannah McKay/File Photo

The S&P Global UK Composite Purchasing Managers' Index for the services and manufacturing sectors fell to 52.8 in May from 54.1 in April, undercutting the median poll forecast for a much more modest dip to 54.0. Readings above 50 denote an expansion in activity.

The dominant services sector reported the weakest growth in six months, more than outweighing a recovery in factories which had their best month in almost two years.

Overall, the PMI pointed to a weakening of momentum in Britain's economy after a strong start to 2024, when it exited a shallow recession.

That will be unwelcome news for Sunak's Conservative Party, languishing in opinion polls behind the opposition Labor Party. Economic competence is at the heart of the prime minister's pitch to voters.

S&P Global said the survey was consistent with economic output growing at a quarterly rate of 0.3%, down from the better-than-expected 0.6% expansion seen in the first quarter.

New orders expanded at the weakest pace so far this year.

The composite PMI's index of companies' cost pressures fell to its lowest since October, after spiking in April when there was a nearly 10% rise in Britain's minimum wage.

"The PMI data support the view that the Bank of England will start cutting interest rates in August providing the data continue to move in the right direction over the summer," said Chris Williamson, chief business economist at S&P Global.

Investors, who pushed back bets on an early rate cut after Wednesday's inflation data showed an unexpectedly small drop in April, see a roughly 50% chance of a first rate cut in August, and a quarter-point move is not fully priced in until November.

The services PMI fell to 52.9 in May from April's 11-month high of 55.0 - far short of the Reuters poll consensus of 54.7.

The manufacturing PMI rose to its highest since July 2022 at 51.3, up from 49.1 in April, helped by rising output and new orders.

(Editing by Hugh Lawson)

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