Private sector grows at fastest pace in five years as UK economy reopens
Britain’s all-important services sector grew at its fastest pace in five years in July as much of the UK economy reopened from the coronavirus lockdown, a survey has shown.
Private sector output as a whole also grew at its fastest clip since 2015 as manufacturing production picked up speed, according to the early survey reading.
The IHS Markit/Cips preliminary services purchasing managers’ index (PMI) – a gauge of the health of the sector – jumped to 56.6 this month from 47.1 in June.
It was the fastest growth since June 2015 and well above economists’ expectations of a rise to 51.1.
The “composite” PMI which covers the whole private sector hit 57.1 in July from 47.7 in June. That compared to a record low of 13.8 in April when the UK economy was put on ice.
It came as official figures showed UK retail sales almost recovered in June from their staggering drops during lockdown. The volume of retail sales jumped 13.9 per cent from May to June.
“The surge in business activity in July will fuel expectations that the economy will return to growth in the third quarter,” said Chris Williamson, chief business economist at data firm IHS Markit.
Yet the UK economy’s recovery is far from certain, Williamson warned. “The scars are likely to be deep,” he said. “A V-shaped recovery is by no means assured.”
“Even with the July rebound there’s a long way to go before the output lost to the pandemic is regained.”
The private sector gauge rose at its fastest pace in five years
UK economy reopens but jobs remains a worry
The government further opened the UK economy in July after letting non-essential shops reopen in June. Pubs, restaurants and cafes were allowed to open at the start of the month. Gyms and pools will follow next week.
Services and manufacturing firms said there was a solid rebound in new orders, IHS Markit said. Some companies said clients had started to look towards the recovery when considering their spending plans.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply (Cips), said the overall July rebound “was fuelled by the release of pent up demand”.
“Clients and customers returned to spending and businesses were able to open their operations as staff returned.”
However, firms continued to lay off workers at a rapid rate, with pace of job losses actually increasing.
Brock said: “The biggest concern is that staffing levels remained disappointingly low across both sectors.” Analysts say persistently high unemployment would hold back growth.
In the UK services sector roughly one-in-three respondents reported a fall in employment in July. Services make up about 80 per cent of the economy and include finance, hospitality, IT, education and other big sub-sectors.