UK private sector growth is the weakest it has been since last year’s winter lockdown, as the cost of living crisis hits consumer demand.
The closely-watched S&P Global / CIPS Flash UK Purchasing Managers Index (PMI) hit 51.8 in May – a 15-month low and down from 58.2 in April.
Anything above 50 is considered growth.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “The UK PMI survey data signal a severe slowing in the rate of economic growth in May, with forward-looking indicators hinting that worse is to come.
“Meanwhile, the inflation picture has worsened as the rate of increase of companies’ costs hit yet another all-time high.
“The survey data therefore point to the economy almost grinding to a halt as inflationary pressure rises to unprecedented levels.
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“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.
“Companies cite increasingly cautious moods among households and business customers, linked to the cost-of-living crisis, Brexit, rising interest rates, China’s lockdowns and the war in Ukraine.”
Speaking later on Sky’s Ian King Live programme, Mr Williamson said there was evidence some customers were pushing back against price increases, warning that this could have unintended consequences.
He said: “It’s obviously a concern for company growth and profits, it’s perhaps a positive sign that overall inflation might start to come down, but there’s this real resistance now building among consumers who are just being squeezed so much by the energy price hikes.
“You’ve got borrowing costs that are going to start increasing as the Bank of England takes more aggressive action to bring down inflation.
“One of the worrying signs we’ve got in this survey is that companies’ costs – which is a leading indicator of high street inflation – they’re continuing to accelerate, so the cost burden is getting worse and worse for those companies.
“They’re going to have to pass that on or take that cut to profits – so either way you look at it, there’s an inflationary scenario or a scenario of weakening profits growth.
“Many people might say it’s about time companies were earning less profits, but the key thing there is that if companies start to re-trench, then they will start cutting employment, they will stop investing so much, so it has a more longer-term impact on the economy – those profits drive future growth.”
