UK Services PMI Preview: Services Activity Ready To Regain Some Momentum In May

This article originally appeared on FXStreet.

• The UK services PMI is expected to pick up slightly to 53.0 in May, up from 52.8 in April.
• The services sector is expected to follow the recovery pattern along with manufacturing and construction. 

The UK service sector is expected to continue to recover from the unexpectedly strong deceleration in March and to rise slightly to 53.0 in May after falling as low as 51.7 in March, the IHS/Markit services PMI is expected to report on Tuesday.

The upturn in the UK services sector is set to remain modest, with the April reading marking the lowest in 18 months, with business growth and job creation both continuing to slow.

The UK services PMI is likely to follow the manufacturing and construction sector pattern with both manufacturing and services turning higher in May after the weather-related slowdown in March. While manufacturing sector PMI decelerated to 53.9 in April just to recover to 54.4 in May, the construction PMI fell as low as 47.0 in March to recover to 52.5 in both April and May this year.

The PMI surveys for services, manufacturing and the construction collectively showed relatively small rebound in business activity after being disrupted by heavy snowfall in March indicating that the underlying performance of the UK economy is subdued.

The slowdown in the UK economic performance was downplayed by the Bank of England in May Inflation Report as weather-related, but the Bank still opted to remain conservative on the outlook for both growth and interest rates. While the May interest rate hike looked almost imminent at the end of March and the beginning of April, the outlook swiftly changed with reports on divergent economic development in a range of the economic indicators thereafter. 

The growth should remain modest and positive in both 2018 and 2019, while is regaining momentum after ending 2017 strongly.