U.K. service sector activity rose more than expected in May, boosting chances of another rate hike this year, IHS Markit and the Chartered Institute of Procurement and Supply said.
The seasonally adjusted Services PMI Business Activity index came in at 54.0, up from 52.8 in April and ahead of Econoday's consensus estimate of 53.0. It was the measure's fastest pace of increase in three months.
"The improvement in service sector activity adds to evidence that the economy is on course to rebound in the second quarter but, like the earlier manufacturing and construction surveys, raises questions about the outlook," said Chris Williamson, chief business economist at IHS Markit.
Earlier data showed U.K.'s factory PMI rising to 54.4 in May from a 17-month low of 53.9 in April. British construction firms also reported steady activity last month despite weaker new order books.
The economy is on course to expand by 0.3% to 0.4% in the second quarter, Williamson said.
"The signs of economic growth rebounding in the second quarter will likely up the odds of the Bank of England hiking interest rates again in coming months, likely August, but with the forward looking indicators suggesting that the economy could relapse, a rate rise is by no means assured," Williamson said.
May sales volumes improved on the back of competitive pricing strategies, greater business investment and successful product launches last month, the report said.
Overall new work rose in the month, but the pace of increase was one of the weakest seen since summer 2016. Employment grew moderately, with service firms pointing to skills shortage as a factor behind delays in filling vacancies. Business confidence moderated amid Brexit-related concerns and subdued consumer demand.
