The economy continued to grow in May but at a slower rate than in April. The final composite output index weighed in at 53.0, up 0.2 points versus its flash estimate but still 1.1 points below the previous month's 12-month high.

As shown in the preliminary data, the headline decline was attributable to a softer performance by services where the flash sector PMI was unrevised at 52.9, well above the 50-expansion threshold but still the weakest since last November. Aggregate new orders increased for a sixth straight month but by the least over the period mainly due to slower growth of demand in services. Even so, overall headcount climbed more steeply than in April and business confidence about the year ahead improved further above its long-term norm.

Meantime, input cost inflation decelerated to a 40-month low while its output price counterpart posted one of its lowest readings since February 2021.

By and large, the final May results should go down well at the BoE. In particular, signs of diminishing inflation pressures in the key services area ought to bolster the likelihood of a cut in Bank Rate during the summer months. A move as soon as this month clearly remains a possibility but after April's inflation update, the August MPC meeting would appear more likely. The UK RPI now stands at minus 21 and RPI-P at minus 29, both gauges showing economic activity in general falling short of market forecasts.

The key composite output index is expected to be unrevised at 52.8, down from April's final 54.1.

The Services Purchasing Managers' Index (PMI) provides an estimate of service sector business activity for the preceding month by using information obtained from a representative sector survey incorporating transport and communication, financial intermediation, business services, personal services, computing and IT and hotels and restaurants. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The data are compiled by the Chartered Institute of Purchasing and Supply (CIPS) and S&P Global.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM non-manufacturing index in the U.S. and the S&P Global PMIs elsewhere, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.

The S&P Global PMI services data give a detailed look at the services sector, how busy it is and where things are headed. The indexes are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.