Source: Sharecast
The services PMI was revised up marginally to 49.0 from the 'flash' reading of 48.9 released two weeks ago, but still signalled a contraction in activity for April, with a figure below the neutral mark of 50.0.
This was the sector's first contraction since October 2023 and the steepest drop since January 2023.
According to S&P Global, heightened business uncertainty weighed heavily on order books during the month.
"Export conditions were particularly weak, with new business from abroad falling to the greatest extent since February 2021," said Tim Moore, economics director at S&P Global Market Intelligence. "Survey respondents often commented on the impact of global financial market turbulence in the wake of US tariff announcements."
Meanwhile, input prices rose at their highest rate since mid-2023 as increases to the National Living Wage and National Insurance Contributions (NICs) added to payrolls costs.
"Businesses in the technology and financial service sectors noted rising risk aversion and delayed spending decisions among clients, especially in relation to major investment plans. Consumer service providers meanwhile cited subdued domestic economic conditions and challenges with passing on rising payroll costs, especially those in the hospitality and leisure sectors," Moore said.
Commenting on the data, Matt Swannell, chief economic advisor to the EY ITEM Club, said that the drop in the PMI is likely a reflection of weaker sentiment in response to US tariff announcements, rather than a genuine decline in services output, but still warned of slowing growth in the second quarter.
"The S&P Global survey typically does a better job at capturing fluctuations in business confidence than actual changes in private sector activity, and we expect April's survey will prove a case in point. It's difficult to reconcile last month's US tariff announcements and the well-trailed increase in employers' NICs with a sudden and outright contraction in services activity.
"Nonetheless, GDP growth is likely to be slower in the second quarter as the initial effects of tariffs start to be felt," he said.