The PMI for services crept from 52.8 in the month of April to 54 in the month of May.
On Tuesday, the newest Services PMI data was released, and it indicates that there had been a recovery in manufacturing and construction activity since the unexpectedly tough winter, raising the overall PMI level to its highest of the year.
Once the data was released, the Pound Sterling went up 0.5% against the Dollar, trading in at $1.34.
According to Service providers, due to the rise in energy prices and a snug labour market in May, it is becoming much more difficult to fill vacancies which in turn is increasing wages.
According to Scotia-bank economist, Alan Clarke, the raised PMIs are a “compelling signal” that should make rate rises in August more likely (if the inflation mirrors what the forecasts predict).
At its last meeting back in May, the MPC put a hold on raising interest rates, following the lower than expected inflation rate. The reason behind their decision was based on wanting to wait for evidence to prove that the low inflation rate was temporary due to the harsh winter.