U.K.: Good News From Services

Activity accelerated again in services in May. The CIPS services activity index (to 54.9 from 52.9) reached its highest level since March 2012. This good news comes on top of better prospects for manufacturing and construction sectors in Q2. The PMI composite index improved further.

In May, activity once more accelerated in services. The CIPS services activity index (to 54.9 from 52.9), which recorded its largest increase in one month since January, reached its highest level since March 2012.

■ The services PMI composite, above the 50-threshold for the fifth month in a row (at 53.8, up from 52.4 in April), reached its highest level since March 2011. Both new business index and business expectations index increased from April to May. The incoming new business index, up by 3 points, even reached its highest level since February 2010 (to 57.2, after 54.2).

■ The employment index slightly increased and was above the 50-threshold for the fifth month in a row (to 51.4, after 51.3 in April). Input and output prices indices finally fell (respectively to 53.5 and 49.7, after 56.3 and 50 in April). Together, the decrease, even if limited, of the output price index and the rise of the employment component are likely to support household’s confidence and spending.

■ After having sharply increased in the first quarter of 2013 (+0.6% q/q), activity in services (more than 75% of Gross value added) may keep on rising in Q2 2013. Additionally, the performance of manufacturing and construction sectors may be less negative in Q2 than in Q1 (respectively -0.3% q/q and -2.4% q/q in Q1). Indeed the PMI indices for activity were up in these sectors in May (respectively to 53.8 and 50.8 after 51.1 and 49.4 in April).

■ Overall, the PMI composite index for activity, up by 2.2 points (to 54.6), reached its highest level since March 2012. GDP, up by 0.3% q/q in Q1 2013, is set to keep growing. There is little chance that the Bank of England decides to more QE this week.

BY Catherine STEPHAN

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