Prices soar as services boom

By DAILY MAIL REPORTER
Updated:

 

Service sector inflation is running at record highs, with firms finding it increasingly easy to charge higher prices thanks to strong demand. The Chartered Institute of Purchasing and Supply's latest snapshot of the sector shows activity continued to bound ahead in May, driven by an acceleration in new business. The survey's headline activity index recorded 59.2, slightly down on April's 59.5 but still well above the 50 no-change level.

Faster growth was seen across the board, except in information technology and computing, where activity eased from the blistering pace set at the end of last year.

Against this positive backdrop, firms are enjoying greater success in passing on higher labour and raw material costs, with prices charged rising at their fastest rate in the survey's history. Production costs were, however, increased by problems finding suitable staff.

The news may concern some members of the Bank of England's monetary policy committee which begins its latest interest rate-setting meeting tomorrow. Economist Jeremy Hawkins at Bank of America said: 'Service sector inflation is almost 1% above the inflation target and the data suggest there could be some disappointing news in the pipeline.'

The pound was firmer at $1.5105 and the euro higher at 94.44 cents as the dollar continued to lick its wounds after Friday's weak US non-farm employment report. The world's most powerful central bankers warned in their annual report that a sudden slump in the dollar posed the biggest single threat to the global economy.

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