UK Service Sector Growth Pick Up in May

The UK service sector strengthened more than expected in May after hitting a 38 month low in April, survey data from Markit Economics showed on Friday.

UK services Purchasing Managers’ Index rose to 53.5 from 52.3 recorded in April, while economists forecast 52.5. A figure above 50 indicates expansion.

One-third of the companies surveyed said they suffered from uncertainty over the EU referendum, Markit said.

According to the report the economy is likely to grow by 0.2 percent in the second quarter of 2016, a 0.4 percent decline from the first quarter of the year.

The data released this week indicates that the manufacturing sector rebounded moderately in May, while construction fell due to slow orders.

“The PMI surveys show that the pace of economic growth remained subdued in May, as ‘Brexit’ worries exacerbated existing headwinds,” said Markit chief economist Chris Williamson.

“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.”

However, new business in the service sector grew at the slowest rate in 41 months. Slowing down new job creation to its weakest since August 2013.

“Despite some improvement compared to April, this is still a pretty lacklustre survey that points to muted services activity,” said Howard Archer, chief UK and European economist at IHS Global Insight.

“The muted services sector is particularly significant as the dominant sector was entirely responsible for UK GDP growth of 0.4% quarter-on-quarter in the first quarter.”

The British pound lost 0.9 percent against the US dollar to trade at 1.4446 ahead of job report due later today.