Signs of caution in the services sector

The prospect of sharper public spending cuts weighed on the services sector last month, with activity remaining broadly unchanged from April, when disruption from Iceland's volcanic ash cloud depressed growth. The Markit/Chartered Institute of Purchasing and Supply (CIPS) purchasing managers' index for services rose to 55.4 in May, marginally up on April's surprise drop to 55.3. Forecasters had expected the index, which has held above the 50-point mark separating growth from contraction for more than a year, to book a rise to 55.5.

The headline figures masked a sharp dip in new business, which fell by nearly two points to 52.8 last month – the third slowdown in as many months and the lowest reading since August 2009. The employment index was down for the first time since September, adding to worries about Britain's economic recovery, with services accounting for two-thirds of GDP.

David Noble. the CIPS chief executive, said: "The political uncertainty after the election, plus rising fears about the domestic economy, have impacted the sector."

Meanwhile, figures from the US Institute for Supply Management showed that America's services sector grew for a fifth month in a row May, although the rate of growth was unchanged from April. The employment index was above the key 50-point mark for the first time since December 2007.