US Services Sector Unexpectedly Contracts

The S&P Global UK Services PMI fell to 47.9 in May 2026 from 52.7 in the prior month, missing market forecasts of 51.7, flash estimates showed. The data indicated the first contraction since April last year and the sharpest downturn since early 2021, as new orders declined. Firms cited greater economic hesitancy and weaker investment sentiment among clients, along with delayed consumer spending decisions in response to the Middle East war, particularly affecting international travel. Several also pointed to domestic political uncertainty weighing on client confidence. As a result, the rate of job shedding accelerated. On the price front, average cost burdens increased, driven by rising oil prices and transport costs, as well as strong wage pressures. Lastly, service providers signaled weaker growth expectations, with planned investment spending and ongoing AI innovation overshadowed by headwinds from inflation, geopolitical uncertainty, and subdued discretionary consumer demand.

The S&P Global UK Services PMI was revised slightly higher to 52.7 in April 2026 from a flash estimate of 52, up from March's 11-month low of 50.5. The data signaled a moderate expansion of the service sector, amid reported resilient global demand for technology services. However, new business intakes remained subdued overall amid headwinds from the Middle East conflict, with concerns over intensifying inflationary pressures, global supply shortages and elevated borrowing costs. Employment fell further, but the rate of job shedding was the weakest in six months. Service providers saw the fastest rise in cost burdens since November 2022, driven mainly by higher transport costs and wages. Several firms also introduced fuel surcharges, pushing service-sector output price inflation to a three-year high in April. Lastly, businesses continued to expect an upturn in business activity over the year ahead. Optimism edged up from March’s nine-month low but remained below the long-run average.

The S&P Global UK Services PMI rose to 52 in April 2026 from 50.5 in the prior month, surpassing market forecasts of 50, flash estimates showed. Business activity growth picked up from March’s 11-month low, with firms citing support from technology investment, marketing initiatives, and long-term business plans. However, new orders posted a marginal reduction, reflecting fragile demand conditions due to rising global uncertainty and higher inflationary pressures amid the ongoing Middle East conflict. Employment also continued to decline. Turning to prices, inflationary pressures increased sharply. Input cost inflation was the steepest since the survey began almost 30 years ago, largely due to higher fuel prices, alongside strong wage pressures. Output charges also rose significantly. Lastly, business sentiment deteriorated amid worries about geopolitical tensions weighing on costs, demand, and investment.