British businesses saw growth slow dramatically this month, and looks set to undershoot expectations, according to an influential survey.
The closely-followed S&P Global/CIPS Flash United Kingdom Purchasing Managers Index (PMI) hit 51.8 in May, a 15-month low and down from 58.2 in April.
Analysts had expected the figure to hit 56.5 according to a consensus provided by Pantheon Macroeconomics.
Anything above 50 is considered growth.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the figures signalled a “severe slowing” in the economy in May and hinted that “worse is to come”.
May flash data for the UK pointed to a slump in private sector growth with the #PMI at a 15-month low of 51.8 (Apr: 58.2). The cost of living crisis hit customer demand hard. Read more: https://t.co/pUNlcF96UP pic.twitter.com/tppwZOiKlD
— IHS Markit PMI™ (@IHSMarkitPMI) May 24, 2022
He added: “The survey data therefore point to the economy almost grinding to a halt as inflationary pressure rises to unprecedented levels.
“The tailwind from the reopening of the economy has faded, having been overcome by headwinds of soaring prices, supply delays, labour shortages and increasingly gloomy prospects.”
The early data for May showed that firms witnessed the fastest rise in operating expenses since the index was first launched in January 1998 amid rampant inflation.
Companies in the services sector signalled a sharp loss in momentum during the month, with a reading of 51.8 following a 58.9 figure in April.
Survey respondents noted that economic and geopolitical uncertainty put the buffers on client demand.
Duncan Brock, group director at Chartered Institute of Procurement & Supply (CIPS), said: “The services sector fared worst with business expectations falling by the most since March 2020 when the pandemic first hit.
“Even the relative buoyancy in orders for travel and hospitality was not enough to rescue service providers from the sinking feeling that recession is knocking on the door.
“The fear is that the squeeze on household incomes could potentially starve the sector of further bookings as rising costs in energy, food and fuel dominate consumer thinking.”
Meanwhile, the manufacturing sector also reported a slowdown in activity, with a reading of 54.6 in May, compared with 55.8 in April, representing a new 16-month low.