UK Private Sector Downturn Slows As Manufacturing Returns To Growth

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Largely driven by the manufacturing sector, the downturn in the UK private sector slowed in June after the record weakness seen during the height of the coronavirus lockdown, flash survey data from IHS Markit showed Tuesday.

The IHS Markit/Chartered Institute of Procurement & Supply composite output index rose to 47.6 in June from 30.0 in May. The reading was above economists’ forecast of 41.0.

The latest reading was below the 50.0 no-change threshold, but signaled the slowest pace of decline since the start of the downturn in March.

The survey showed that another drop in service sector activity contrasted with a return to production growth among manufacturing companies in June.

The flash manufacturing Purchasing Managers’ Index climbed to 50.1 in June from 40.7 a month ago. The expected reading was 45.0. A score above 50 signals expansion.

The flash services PMI advanced to 47.0 in June from 29.0 a month ago. The score was expected to rise to 40.0.

The easing of restrictions related to the coronavirus disease, or Covid-19, pandemic had a favorable impact on economic activity. Nonetheless, there were also widespread reports that underlying demand remained very subdued.

New work received by private sector firms decreased for the fourth straight month, although the pace of decline eased sharply since May.

Concerns about the likely speed of recovery in customer demand also weighed on employment numbers in June, with the latest survey indicating another rapid drop in total staffing levels.

UK private sector firms indicated a squeeze on margins in June, with subdued demand leading to widespread price discounting despite a rebound in average cost burdens.

A number of survey respondents noted that they had absorbed extra operating costs amid efforts to adapt and restart business operations with Covid-19 safety measures.

“In general, this is good news for the UK economy, but in terms of any significant recovery, 2020 is likely to be a write-off,” Duncan Brock, group director at CIPS, said.

The following year may see some more stability and real growth as the pandemic’s effects continue to ripple through the remainder of 2020, Brock noted.


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