The UK services sector returned to growth by a small margin in April, but remained “near-stagnant” according to a closely watched industry survey.
The IHS Markit purchasing managers’ index for services rose to 50.4 in April, up from 48.9 in the previous month and broadly in line with consensus expectations in a Reuters poll. A reading above 50 indicates a majority of companies reporting expanding business activity.
“A near-stagnant service sector in April means that all three major parts of the economy were struggling to grow in April,” said Chris Williamson, chief business economist at IHS Markit. “Although the service sector joined construction in reporting a return to growth, in both cases the expansions were only marginal.”
April PMI data indicated a fall in new business activity for the fourth consecutive month, while employment numbers were broadly unchanged. Companies surveyed reported that higher wage costs and weaker sales had led to cautious staff hiring policies, according to the report.
However, on Thursday the Bank of England warned that surveys could underestimate the pace of UK economic growth.
“The relationship between survey responses and GDP growth may be weaker at times of high uncertainty. This may be, in part, because surveys are sensitive to changes in sentiment,” wrote the Bank in its latest inflation report.
