The UK service sector saw a “modest expansion” in March but economists overestimated S&P Global’s purchasing managers’ index (PMI) readings for the month.
S&P Global’s latest composite PMI reading, which takes an average of manufacturing and services output for the month, came in at 51.5.
The figure points to a slight expansion in UK output as it skimmed the 50-figure benchmark. But a Bloomberg poll of economists predicted that the UK’s composite PMI would reach 52.0.
The reading for March also comes in well below the long-run average of 53.6.
S&P’s UK services PMI figure of 52.2 – which takes into account data provided by 650 companies – was just under a percentage point below economists’ expectations.
While the acceleration in service sector growth was its fastest in seven months, hospitality and manufacturing are suffering from “weak business conditions”, according to S&P Global Market Intelligence economics director Tim Moore.
“Service providers reported a range of constraints on growth, including stretched household budgets, risk aversion among corporate clients and rising geopolitical uncertainty.”
Service businesses also remained cautious about the near-term outlook, with optimism still among the lowest seen over the past two years.
Moore added: “Worries about increasing wages and the impact of forthcoming US tariffs were the most cited challenges in March.”
The lower-than-expected readings will be an omen for April, as data for this month will take into account the effects of President Trump’s sweeping tariffs.
In a historic speech at Rose Garden on Wednesday night, the US president unveiled a baseline 10 per cent tariff on imports coming from Britain.
He accused his trading partners of “looting, pillaging, raping and plundering” the US economy.
April’s figures will also be an indicator for how businesses cope with Rachel Reeves’ £20bn tax raid on employers and higher energy bills.
Economists predict that the UK economy could be held back by as much as one per cent.