Growth in the UK services sector hit a 24-year high in May as coronavirus restrictions eased, according to a survey released on Thursday.
The IHS Markit/CIPS purchasing managers’ index for services rose to 62.9 from 61.0 in April, coming in ahead of the initial estimate of 61.8 and marking the strongest rise in business activity since May 1997.
A reading below 50.0 signals contraction, while a reading above indicates expansion.
The composite PMI – which includes the manufacturing sector – rose to 62.9 in May from 60.7 the month before, coming in above the flash estimate of 62.0. It also marked the steepest rate of expansion since the series began in January 1998.
Tim Moore, economics director at IHS Markit, said: “UK service providers reported the strongest rise in activity for nearly a quarter-century during May as the roll back of pandemic restrictions unleashed pent up business and consumer spending.
“The latest survey results set the scene for an eye-popping rate of UK GDP growth in the second quarter of 2021, led by the reopening of customer-facing parts of the economy after winter lockdowns.
“Pressure on business capacity due to a spike in demand and staff hiring difficulties emerged as a major challenge for service sector companies in May. Job creation was the strongest for over six years, but backlogs of work accumulated to the greatest extent since the summer of 2014.”
Moore said the vaccine roll out has generated a strong willingness to spend and fortified business optimism across the service economy. “However, inflationary trends intensified in May as suppliers passed on higher transport bills, staff costs and raw material prices,” he added.
