Yahoo Finance UK businesses blame higher wages for price rises
UK service sector firms increased their prices again last month, as they tried to pass on higher wage costs to customers
The final S&P Global/CIPS UK Services Purchasing Managers' Index (PMI) came in at 55.2, down slightly from April's one-year high of 55.9 in April. Remaining above the 50-point mark that separates growth from expansion, it shows the sector continued to expand, but at a marginally slower pace.
Service sector cost inflation hit a three-month high in May, due to higher payroll costs.
"Higher salary payments more than offset lower fuel costs, which meant that overall input price inflation edged up," said Tim Moore, economics director at S&P Global Market Intelligence.
Businesses were passing much of the costs for staffing and raw materials such as food on to consumers. However, some firms found their clients were reluctant to accept higher prices.
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“Average prices charged by service sector companies nonetheless increased at the second-weakest pace since August 2021 amid some reports of greater price resistance among clients,” Moore added.
Fueled by resilient demand for consumer and technology services, growth across the #UK’s service sector remained robust in May (#PMI at 55.2; Apr: 55.9). This was despite still severe #inflationary pressures. Read more: https://t.co/Rt4oTQPxyX @cipsnews pic.twitter.com/KaO0MAcgtL
— S&P Global PMI™ (@SPGlobalPMI) June 5, 2023
Robust sales pipelines and greater willingness to spend from consumers, despite ongoing economic uncertainty, helped to boost order volumes in May.
Read more: UK manufacturing downturn deepens in May
S&P Global said employment rose for the fifth month in a row in May and improved staff availability helped businesses fill vacancies, although the rate of job creation was much softer than the average seen in 2022.
The UK services PMI is compiled by S&P Global from responses to surveys sent to purchasing managers at around 650 UK service sector companies, with data collected between May 11 and 26.
Watch: UK inflation dips to lowest level in over a year but food prices remain high
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