Investing.com – Activity in the U.K. service sector fell more than expected in May, pulling back from what had been a high for the year in the previous month and dampening optimism over the British economy as the sector makes up approximately 80% of gross domestic product, industry data showed on Monday.
In a report, market research group Markit said the seasonally adjusted IHS Markit/CIPS services purchasing managers’ index (PMI) decreased to 53.8 last month from a reading of 55.8 in April.
Analysts had expected the index to drop to only 55.0.
On the index, a level above 50.0 indicates expansion in the industry, below 50.0 indicates contraction.
The report indicated that it was the weakest pace since February, market by a “slight loss of momentum” for new business growth.
Input cost inflation also eased to an eight-month low.
“Despite slower growth in May, the surveys indicate that the economy has regained some momentum in the second quarter,” Markit chief economist Chris Williamson said in the report.
Combined with the other PMI surveys from manufacturing and construction, Williamson said the data points to growth of 0.5% for the first quarter, although he admitted that the slowing in May provided some downside risks to the near-term outlook.
Following the report, GBP/USD was trading at 1.2872 from around 1.2878 ahead of the release of the data, EUR/GBP was at 0.8750 from 0.8748 earlier, while GBP/JPY traded at 142.28 compared to 142.31 previously.
Meanwhile, London’s FTSE 100 traded lower in mid-morning trade, falling 0.18%.