(Bloomberg) -- The UK economy’s recovery lost some momentum in May as activity and price pressures in the services sector started to fade.

S&P Global said its composite purchasing managers index slipped to 52.8 in May, down from a 12-month-high of 54.1 in April. The reading was below economists’ expectations of 54 with any score above 50 signaling growth.

May marked the weakest performance for the services sector — which has powered the economy’s recovery — in six months. However, factories returned to growth with the manufacturing output index hitting its highest in over two years.

The figures suggest that a rebound from last year’s mild recession has started to moderate after GDP surged 0.6% in the first quarter, the strongest performance in over two years. S&P said the latest survey is “consistent with GDP rising by around 0.3% in the second quarter.”

The survey also found that services firms saw the weakest cost pressures in over three years, providing some comfort to Bank of England rate-setters looking for signs of cooling inflation in the UK’s largest sector. Across services and manufacturing, prices charged rose at the weakest pace since February 2021.

Traders pushed back their bets on a summer interest-rate cut on Wednesday after inflation slowed by less than the BOE had expected in April. Services inflation was particularly sticky at just below 6%. Investors are now only fully pricing in the first rate reduction by November.

“The survey also brings welcome news of a cooling in service sector inflation, which is needed to open the door for the Bank of England to start cutting interest rates,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. “A temporary surge in wage-related cost growth seen in April is showing signs of fading in May. Firms are also reporting that strong competition is limiting their scope to raise prices.”

S&P said that employment levels rose for a fifth straight month, though only slightly. New business volumes climbed for a sixth month but the growth was the weakest in 2024 so far.

©2024 Bloomberg L.P.