It's a hat trick: UK growth to dip in the second quarter as service sector activity disappoints again in May

 
Emma Haslett
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A waiter prepares a Bloody Mary cocktail
Services is the UK's largest sector (Source: Getty)

Activity in the UK's most dominant sector rose slightly in May - but remained disappointing, pushing down expectations for GDP growth, data published today showed.

Markit said the purchasing managers' index rose to 53.5 in May, from 52.3 in April. Anything above 50 indicates an expansion.

But April's figure was a 38-month low - and May's figure isn't much higher, Markit suggested.

"Growth remained weak both in the context of the current upturn and the historic survey trend. The index has averaged 55.2 since it was first compiled in July 1996."

Sector April PMI May PMI
Manufacturing 49.2 50.1
Construction 52.0 51.2
Services 52.3 53.5

The figure pushed down expectations for GDP growth in the second quarter, added Chris Williams, the company's chief economist.

“The PMI surveys show that the pace of economic growth remained subdued in May, as ‘Brexit’ worries exacerbated existing headwinds. The data so far indicate that the second quarter is likely to see the economy grow by just 0.2 per cent.

“Growth has collapsed in manufacturing and construction, leaving the economy dependent on the service sector to sustain the upturn, though even here the pace of expansion has remained frustratingly weak so far this year."

The data made a hat-trick of disappointing PMI figures: yesterday Markit showed construction came in at 51.2 in May, its lowest reading since June 2013.

On Wednesday, the manufacturing industry showed similarly disappointing growth, falling to just 50.1.

"The widening gap between services and manufacturing suggests George Osborne has a long way to go if he is to realise his ambition of rebalancing how Britain generates its output," said Russ Mould, investment director at AJ Bell.

“The imbalanced nature of the UK economy remains a concern. The services industry continues to perform better than manufacturing and the gap between sentiment in the two has started to grow again, having narrowed during the second half of 2015.”

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