• Prior 58.9
  • Manufacturing PMI 54.6 vs 55.1 expected
  • Prior 55.8
  • Composite PMI 51.8 vs 56.5 expected
  • Prior 58.2

That's a stark miss on estimates as UK services activity slumps to a 15-month low with the cost-of-living crisis worsening in May. Of note, escalating inflationary pressures and heightened geopolitical uncertainty acted as constraints on demand. A rapid acceleration in input cost  inflation  across the service economy was observed leading to concerns about squeezed margins and weaker order books, resulting in a considerable drop in business expectations for the year ahead.

S&P Global notes that:

“The UK PMI survey data signal a severe slowing in the rate of economic growth in May, with forward-looking indicators hinting that worse is to come. Meanwhile, the inflation picture has worsened as the rate of increase of companies' costs hit yet another all-time high.

“The survey data therefore point to the economy almost grinding to a halt as inflationary pressure rises to unprecedented levels.

“The tailwind from the reopening of the economy has faded, having been overcome by headwinds of soaring prices, supply delays, labour shortages and increasingly gloomy prospects. Companies cite increasingly cautious moods among households and business customers, linked to the cost-of-living crisis, Brexit, rising interest rates, China's lockdowns and the war in Ukraine.

“There are some signs that the rate of inflation could soon peak, with companies reporting price resistance from customers, and it is likely that the slowing in demand will help pull prices down in coming months. However, the latest data indicate a heightened risk of the economy falling into recession as the Bank of England fights to control inflation.”