The UK service sector rebounded in April following the snow disruptions seen in March, but the latest upturn was one of the weakest since late 2016, survey data from IHS Markit showed Thursday.
The IHS Markit/Chartered Institute of Procurement & Supply services Purchasing Managers’ Index rose to 52.8 in April from a 20-month low of 51.7 in March. Nonetheless, the reading was below the forecast of 53.5.
The latest reading only signaled a moderate increase in service sector activity, with the rate of growth the second-weakest since September 2016.
The overall expansion signaled by the three PMI surveys in April was the second-weakest since the Brexit vote, pointing to a quarterly rate of GDP growth of around 0.2 percent at the start of the second quarter, Chris Williamson, chief business economist at IHS Markit, said.
The slight pick-up in the services PMI in April will do a little to assuage fears that the economy has suffered a loss of underlying momentum and makes the chance of an interest rate hike next week extremely slim, Paul Hollingsworth, an economist at Capital Economics, said.
Respondents of the survey said subdued consumer willingness-to-spend had held back business activity growth in April. There were also reports that concerns about the domestic economic outlook acted as a brake on spending by corporate clients.
The rate of service sector employment growth moderated to its weakest since March 2017. Higher payroll costs and tight labor market conditions weighed on staff recruitment.
Higher salary payments continued to push up cost burdens across the service economy. Nonetheless, the overall rate of input price inflation eased since March and remained softer than at any time in 2017.
Moreover, the latest rise in average prices charged by service sector firms was the joint-slowest since July 2017.
The survey showed that the balance of companies expecting a rise in business activity over the year ahead reached its highest level since January.