Private sector likely to have seen strongest growth in more than 20 years - 'flash' PMI

The UK’s private sector economy is likely to have grown at its fastest pace for more than two decades amid strong levels of pent-up demand, early economic data for May suggests.

The closely-monitored IHS Markit/Cips Flash UK Composite PMI (purchasing managers’ index) came in at 62 for the month, up from a reading of 60.7 in April. Any result above 50 represents growth in output.

It suggests that the UK has seen its strongest private sector growth since the index began in 1998, on the back of a “strong” performance in both the manufacturing and services sectors.

Relaxed pandemic restrictions and pent-up demand from consumers also helped to spark a rise in employment, with the figures pointing to the fastest rise in private sector employment for more than six years.

Relaxed pandemic restrictions and pent-up demand from consumers also helped to spark a rise in employment. Picture: Lisa Ferguson

More detailed sector PMI snapshots for May will be published in early June.

Howard Archer, chief economic advisor to the EY Item Club, said: “The ‘flash’ purchasing managers’ survey for the UK manufacturing and services sectors indicated that overall activity rose appreciably in May. The economy, and the services sector in particular, benefited from the easing of restrictions.

“Another positive development saw confidence strengthen to the highest level since the series began, primarily reflecting improved orders and an upbeat view of the outlook.

“Not so good news saw input prices rise at the fastest rate for nearly 13 years. Markit reported that ‘manufacturers mostly commented on price pressures due to shortages of raw materials and high shipping costs, while service providers often noted increased staff salaries’.”

Daniele Antonucci, chief economist and macro strategist at Quintet Private Bank, the parent company of Brown Shipley, noted: “The strong upside surprise in the purchasing managers’ indices across the UK and euro area are yet another sign that spending on services and big-ticket goods is picking up. The lifting of restrictions and, therefore, the reopening of many activities are the key drivers of this bounceback.”

The services sector, which includes hospitality firms which have benefited from eased restrictions this month, saw a reading of 61.8 for the month, marginally below analysts’ predictions.

Meanwhile, the manufacturing reading jumped to 66.1, the highest figure since the survey began.

Chris Williamson, chief business economist at IHS Markit, said: “The UK is enjoying an unprecedented growth spurt as the economy reopens.

“Factory orders are surging at a record pace as global demand for goods continues to revive, and the service sector is reporting near-record growth as the opening up of the economy allows more businesses to trade.

“Business confidence has meanwhile hit an all-time high as concerns about the impact of the pandemic continue to fade.”

However, the rebound also resulted in price inflation with costs pressures at “the strongest for nearly 13 years”.

Duncan Brock, group director at Cips, added: “Manufacturers keen to secure raw materials for the coming months were forward buying with greater intensity and contributing to the ongoing poor performance of supply chains as delivery times increased to record-levels.

“This in turn compounded the number of shortages and impacted on the costs of goods and raw materials.”

A message from the Editor:

Thank you for reading this article. We’re more reliant on your support than ever as the shift in consumer habits brought about by coronavirus impacts our advertisers. If you haven’t already, please consider supporting our trusted, fact-checked journalism by taking out a digital subscription: www.scotsman.com/subscriptions