UK Final Services PMI beats estimates with 29.0 in May, GBP/USD unfazed below 1.26

The UK services sector activity improved more-than-expected in May but remained into contraction, the final report from IHS Markit showed this Wednesday. 

The seasonally adjusted IHS Markit/CIPS UK Services Purchasing Managers’ Index (PMI) was revised higher to 29.0 in May versus 28.0 expected and a 27.8 – May’s first reading.

Key points

New work slumps amid cutbacks to business and consumer spending.

Employment remains on sharp downward trajectory.

Business expectations rise again from March's record low.

Tim Moore, Economic Director at IHS Markit, which compiles the survey

“The COVID-19 pandemic continued to have a severe impact on UK service sector activity in May, despite a boost in some areas from the gradual easing of lockdown measures. Survey respondents noted that deep cuts to corporate spending had been a major factor dragging down business activity in May, leading to a lack of work to replace completed projects.”

"A number of firms cited limited opportunities to win new orders with clients placed on furlough, as well as a hit to workloads from the postponement of new projects. Consumer demand also remained very subdued, with large areas of the service economy still in the planning stage of restarting business operations.”

FX implications

The GBP bulls failed to benefit from the upward revision to the UK Services PMI for May, as GBP/USD kept its range trade below 1.2600 on the data release. The cable now trades at 1.2584, up 0.29% on the day.