HOPES have been raised that UK economic growth is picking up pace in the second quarter after a key survey signalled a big leap in private sector activity in May, driven by a resurgence in manufacturing and the reopening of retail and hospitality.
The seasonally adjusted, flash composite purchasing managers index (PMI) for the services and manufacturing sectors reached a series high of 62.0 in May, up from 60.7 in April. The index gave readings of 56.4 in March and 49.6 in February. IHS Markit and CIPS (Chartered Institute of Procurement & Supply), which compile the data, said the rate of expansion was the fastest since the composite index began in January 1998, and was underpinned by strong contributions from manufacturing and services.
The expansion came amid steep increases in output, new orders and employment in the manufacturing sector, and rising demand for hotels, restaurants and other consumer-facing services as hospitality, tourism and non-essential retail reopened.
The flash manufacturing PMI reading surged to 66.1 in May, the highest since this survey began in January 1992, from 60.9 in April, while the reading for services rose to 61.8 from 61. Any reading above 50 signifies expansion.
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Chris Williamson, chief business economist at HIS 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.”
Howard Archer, chief economic adviser to the EY ITEM Club, noted that the index had shown employment had risen for the third month in a row after a year of contracting, and at the “fastest rate since June 2014”.
But he observed: “Not so good news saw input prices rise at the fastest rate for nearly 13 years.”
The report noted that pressure on prices came from a “shortages of raw materials and high shipping costs, while service providers often noted increased staff salaries.”
Kieran Tompkins, assistant economist of Capital Economics, said the latest reading from the closely watched IHS Markit/CIPS index – the highest in more than 20 years – “points to the economic recovery shifting through the gears and picking up speed.”
By Scott Wright
Source: Herald Scotland
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