UK election fears hit car sales and services
Britain's dominant services sector slowed more than expected last month and car sales fell with Thursday's general election partly blamed for making consumers and business nervous.
British economic growth slowed to just 0.2pc in the first three months of this year - the weakest among the world's top advanced economies - as the cost of the pound's fall following last year's Brexit vote caught up with consumers.
Many economists have said they expect growth in the current quarter to partially rebound, but some said that weakness in yesterday's services purchasing managers' index (PMI) made this less likely.
"The pullback in the services PMI in May from April's four-month high is a setback to widespread hopes that the economy's slowdown in the first quarter will be fleeting," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
The headline adjusted Purchasing Managers Index for the UK's services sector posted 53.8 in May, down from 55.8 in April. It was the slowest expansion of service sector output since February. New car sales fell over 8pc from the same month last year. with the Society of Motor Manufacturers and Traders partly blaming the election.
Weaker new business growth due to delayed decision-making ahead of the election was also blamed for the services dip.
The Conservative Party's lead over Labour has narrowed markedly from 20 points or more when Prime Minster Theresa May called the election in April to a range of between one and 12 points now, although the Conservatives are still expected to win a majority.
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The pound rose on currency markets, which favour Mrs May over Jeremy Corbyn, after the latest ICM poll, taken between June 2 and June 4 and published yesterday, suggested the Conservatives were ahead by 11 points.
The services PMI does not cover retailers, who suffered their worst quarter since 2010 in the first three months of the year, and appear to have struggled again last month after a brief respite in April.The services PMI suggested inflation may be starting to ease in the sector. Average prices charged rose at the slowest pace since November, while corporate costs grew at the slowest rate in eight months, despite a pick-up in salaries.
Meanwhile, the rate of economic growth in the eurozone continued to run at the quickest pace in six years during May.
The latest expansion was supported by strong growth of incoming new business. (Additional reporting Reuters)