U.K. Services Sector Contracts at Steepest Pace Since 2023, PMI Shows

• Britain's services sector, accounting for much of the economy, shrank in April for the first time since October 2023 and at the fastest pace in more than two years, according to a survey that showed U.S. tariff turmoil is hammering exports and sentiment.
• The S&P Global UK Services Purchasing Managers Index dropped to 49.0 last month from March's 52.5, the steepest pace of decline since January 2023, although it was marginally above a preliminary reading for April of 48.9.
• New orders and employment both fell more sharply than in March, while input cost pressures increased at the fastest rate since July 2023, something the Bank of England (BoE) is likely to note ahead of its interest rate meetings this week.
• Survey compiler S&P Global said the faster input inflation reflected a rise in payroll taxes introduced by British finance minister Rachel Reeves and a nearly 7% increase in the minimum wage. The monthly fall in hiring was the seventh in a row.
• The BoE is expected to reduce its benchmark Bank Rate to 4.25% from 4.5% on Thursday, May 8, and investors are wondering if the central bank will signal a quicker pace of cuts further ahead. BoE policymakers have said Trump’s trade policies will hit growth, although the impact on inflation is not yet clear.
• Furthermore, the International Monetary Fund (IMF) last month cut its forecast for British economic growth in 2025 to 1.1% from a previous estimate of 1.6%, but said the country was likely to grow more strongly than its peers in Europe, including France and Germany.

(Sources: Reuters)