Flash UK PMI holds close to record high in June as economy booms
The UK's record economic growth spurt continued in June, according to the latest flash PMI data from IHS Markit and CIPS. Having been hit hard by COVID-19 lockdown measures in the opening months of the year, businesses have reported a surge in demand as the economy reopens, albeit with some signs that the rate of expansion appears to have peaked in May. Full order books and a further loosening of virus-fighting restrictions should nevertheless help ensure growth remains strong as we head through the summer.
Record expansion shows signs of peaking
The flash composite PMI output index, covering both services and manufacturing, fell from its all-time high of 62.9 in May but at 61.7 still indicated the joint-second strongest expansion of economic activity signalled since comparable data were first available in 1998.
The impressive June reading means the average growth seen in the second quarter has been the highest yet recorded by the survey. The PMI therefore indicates that GDP will have rebounded sharply after having fallen by 1.5% in the first quarter, buoyed by the re-opening of the economy from COVID-19 lockdown measures reintroduced at the start of the year.
Both manufacturing and services reported surging growth again in June, albeit with rates of increase down slightly on the near-record gains seen in May.
New business inflows cool from record
Both sectors also saw growth of new orders cool from May's record highs, though with manufacturing reporting the stronger pace of order book growth by some margin. The sustained strong order book expansion bodes well for business activity and output to rise sharply again in July, though the cooling in the rate of demand growth hints that the second quarter could represent the peaking in the pace of recovery.
Hospitality sector leads recovery in June
Output rose in all broad sub-sectors of the economy with the exception of transport & communication services. The strongest upturn was reported for hotels, restaurants & catering, reflecting the opening up of the hospitality sector from the latest lockdown, followed by mechanical engineering. June has seen COVID-19 containment measures ease to the lowest since last October.
July and August are scheduled to see restrictions eventually ease to the lowest since the pandemic began, with the removal of some lockdown measures having been delayed from 21 June to 19 July. This delay is likely to have pushed some of the expected economic growth from the second quarter into the third quarter.
Chris Williamson, Chief Business Economist, IHS Markit
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Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
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