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More sectors report output growth in May

 

Four out of 14 UK sectors saw output grow in May – two more than in April

Lloyds
Published on: 23 June 2025
3 min read
  • Four out of 14 UK sectors saw output grow in May – two more than in April
  • Five other sectors experienced an easing on the rate of contraction  
  • However, margin pressures increased as weaker demand constrained businesses’ ability to offset costs

 

More parts of the economy saw higher activity levels in May, according to the latest UK Sector Tracker from Lloyds. 

Four of the 14 sectors monitored by the Tracker grew in May – two more than in April. Software services expanded at the fastest pace (55.8), while food and drink manufacturing (51.1) grew for the first time since March. Of the four sectors that grew, these were the two sectors to see a rise in demand, as measured by new orders. A reading on the Tracker – which surveys around 1,300 private sector companies each month – above 50.0 indicates expansion, while a reading below 50.0 indicates contraction.

Of the 10 sectors where overall output fell, five recorded a reading on the Tracker’s Output Index closer to the 50.0 level than the previous month, which signalled that the rate of contraction had eased. When read alongside the Output Index for the four growing sectors, this showed nine sectors recorded higher index levels in May – the most since August 2024. 

Cost inflation improves but margin pressures intensify

In May, the Tracker’s composite measure of input cost inflation improved marginally (65.8 in May vs. 67.9 in April). Sectors that are more labour-intensive were the most exposed to cost increases, with tourism and recreation (79.3) reporting the sharpest rate of cost inflation.

Despite this, businesses raised their own prices at the slowest rate in five months. This was driven by weaker demand, which constrained their ability to offset cost pressures through price rises, leading to increased margin pressures.

This month’s UK Sector Tracker provides tentative hope that the economy saw a rebound in activity in May with four sectors reporting output growth - two more than in April - while two sectors saw an increase in new orders, up from just one in April. While most sectors still face weak demand and rising costs are squeezing margins for businesses, the broader uptick in activity could suggest some early signs of renewed momentum.

Nikesh Sawjani Senior UK Economist at Lloyds

 

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