British service sector activity grew slightly more than expected in May, but companies raised prices at their weakest rate in more than a year, a survey showed today.
The Chartered Institute for Purchasing and Supply/NTC index for activity in the services sector came in at 57.2, well above the 50 divide between expansion and contraction.
May's reading matched April's seven-month low and was just above expectations in a Reuters poll of 57.
The prices charged index fell to 52.5, the lowest since February 2006, from 53.9 in April, while firms' costs grew at their weakest pace this year with an index reading of 58.3, down from 58.6 in April.
Interest rate futures rose after the data, which soothed investors' fears the Bank of England could raise interest rates this week. But most economists still expect the central bank to hike borrowing costs from 5.5 per cent in the next few months.
The bank has already raised interest rates four times since last August to tame inflation, citing companies' increased pricing power as a key concern.
NTC said strong competition had restricted firms' pricing power, and over 80 per cent of companies polled reported that output prices were unchanged from the previous month.