London (UK)- Growth in UK manufacturing and services slowed more than expected to the lowest rates in more than a year as the cost of living crisis, rising rates and inflation hit demand this month, a survey has shown.
The composite purchasing manager index from S&P Global and CIPS UK, a barometer of the health of the private sector, dropped to a 15-month low of 51.8 in May from 58.2 in the previous month. A reading above 50 indicates growth.
Based on interviews conducted between May 12 and 22, the reading was worse than the 56.5 forecasts by economists polled by Reuters.
Sterling dropped 0.8 per cent against the dollar on the report showing weaker than expected business activity.
Chris Williamson, the chief business economist at S&P Global Market Intelligence, said the UK PMI survey data signal “a severe slowing in the rate of economic growth in May, with forward-looking indicators hinting that worse is to come”.
Businesses noted increasingly cautious moods among households and customers, Williamson said. This was linked to the cost of living crisis, Brexit, rising interest rates, coronavirus lockdowns in China and the war in Ukraine.
The survey reported the fastest rise in operating expenses since this index began in January 1998, led by a rapid acceleration in input cost inflation across the services economy.
Concerns about squeezed margins and weaker order books led to a considerable drop in business expectations for the year ahead. This index signalled the lowest private sector growth projections since May 2020.
“The survey data, therefore, point to the economy almost grinding to a halt as inflationary pressure rises to unprecedented levels,” said Williamson.
