The Bank of England could cut interest rates “as soon as this month” amid falling costs for the services sector, according to a closely watched survey.
The S&P Global UK services PMI showed that input cost inflation faced by British services companies grew at its slowest pace since February 2021.
Activity in the UK’s services sector grew at a slower rate last month amid easing new business orders, with the reading falling to 52.9 in May, down from 55 in April, which was above estimates from economists.
Joe Hayes, principal economist at S&P Global, said: “Of particular interest to the immediate outlook for the UK economy will be the prices measures, with the Bank of England potentially moving to cut interest rates as soon as this month.
“The PMI surveys show prices for UK services rising at the slowest pace for over three years.
That’s now three months on the trot that selling price inflation in the service sector has eased – this will be very encouraging to the Monetary Policy Committee and suggests the trajectory of services prices is moving in the right direction.”
Thomas Pugh, economist at RSM UK, added: “The takeaway from this is that April’s sticky services inflation was probably a direct response to the increase in the minimum wage, rather than a reflection of underlying price pressures.
“Services inflation should slow over the next few months setting the stage for the Bank of England to cut interest rates this summer.”
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2024-06-05 09:53:56Z
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