05 June 2006 | Rebecca Ellinor

May's survey of the UK services sector showed increasing business activity and employment growth at an 18-month peak.

The latest CIPS/RBS Purchasing Managers' Index, in which a figure above 50 indicates growth, recorded 59.2 in May. This means while activity continued to increase, its rate of growth eased slightly on April's 27-month high of 59.7.

New business orders continued to grow, marking more than three years of new order expansion in the sector. The incoming new business index recorded a reading of 58.3. Successful marketing, the opening of new facilities and the introduction of new products to the market were among reasons cited for contract wins.

The sharp increase in activity encouraged companies to take on extra staff and raise charges in response to an increase in input costs. The employment index posted a reading of 53.7, with employment rising at its sharpest rate since November 2004. The average prices charged index recorded 54.6.

The business expectations index posted 74.7 - its highest level in four months.

Coverage of previous PMI reports is available at www.supplymanagement.com/pmi

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