Services sector activity rebounds as firms brush off Brexit fears

Activity in the services sector rebounded last month having hit its lowest level in two years in April as more firms reported an uptick in new business.

Investec’s latest Purchasing Managers’ Index rose to 61.7 in May, up from April’s 59.8 reading.

The index, which covers businesses from banks to hotels, has been above the 50 mark denoting growth for more than three years.

It fell in April after some panelists reported political instability at home and abroad surrounding Britain’s impending vote on EU membership had led to delays in getting contracts confirmed.

However, in the latest survey the sub-index for new business, one of the key indicators of activity, jumped to a four-month high.

New export orders also rebounded to their strongest level since January.

The sub-index covering input prices also grew at a marked pace during May, with higher staff, fuel and insurance costs blamed.

"All in all, this is a very positive report, which is just the tonic after a downbeat manufacturing PMI release earlier this week," said Philip O'Sullivan, chief economist at Investec Ireland. "In any event, we expect to see stronger readings from both PMIs later this year, assuming our base case that UK voters choose to remain in the EU comes to pass."