UK Businesses Raise Prices To Pass On Higher Wage Costs  

• Britain's services sector kicked off the second quarter with its fastest growth in a year, boosted by new orders, but it passed the cost of rising wage bills on to consumers, adding pressure on the Bank of England to keep raising interest rates.
• The final S&P Global/CIPS UK Services Purchasing Managers' Index (PMI) rose to 55.9 from 52.9 in March, above the 50 threshold for growth and higher than a provisional reading of 54.9.
• The reading added to a series of improved measures of the economy which had appeared to be heading for a recession in early 2023. Official mortgage and consumer lending data also surprised to the upside on Thursday. "A strong rate of service sector growth meant that the UK economy started the second quarter of 2023 in a positive fashion," Tim Moore, economics director at S&P Global Market Intelligence said.
• However, prices charged by businesses picked up pace after rising by the smallest amount in 22 months in March, and are still increasing noticeably faster than before the COVID-19 pandemic as firms rebuild profit margins. A BoE survey of companies on Thursday showed expectations for selling prices refused to budge lower in April, although their predictions for wage growth and inflation in the coming year cooled.
• The BoE, which is expected to lift its Bank Rate to 4.5% next week, is closely monitoring wage-setting and businesses' profit margins as it attempts to return double-digit inflation to its 2% target.

(Source: Reuters)