Activity in the British service sector increased at a faster rate in May, and to a greater extent than forecast by economists, as new business intakes increase the most in more than three years, data from a survey by Markit Economics and the Chartered Institute of Purchasing and Logistics (CIPS) showed Wednesday.

The seasonally adjusted purchasing managers' index (PMI) for the service sector increased to 54.9 in May from 52.9 in April, marking the fifth successive growth that was the sharpest in since March 2012. The index was forecast to rise to 53.1. PMI reading above 50 suggests growth, while those below indicate decline.

The sharp increase in activity was driven by a combination of higher sales volumes, promotional activities and new product launches, the survey showed.

In line with the upturn in activity, firms increased their workforces for the fifth consecutive month amid evidence of marginal capacity pressures and with positive expectations for the coming year.

Input price inflation in the services sector continued the downward trend in May and hit the lowest level in twelve months. Factory gate prices decreased modestly during the month amid competitive pressures.

At the same time, business confidence was a little firmer in May as entrepreneurs were encouraged by current trends in new work, and expect a better economic climate to support expansion.