UK Private Sector Growth Reaches 5-Year High

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The UK private sector grew at the fastest pace in five years in July following the easing of lockdown measures to contain the spread of the coronavirus, flash survey data from IHS Markit showed Friday.

The IHS Markit/Chartered Institute of Procurement & Supply composite output index rose to a 61-month high of 57.1 in July from 47.7 in June. The score was expected to rise to 51.1.

The reading rose above the neutral 50.0 for the first time since February. The index has risen for three straight months after hitting a survey-record low of 13.8 in April. The July expansion was the fastest recorded ever since June 2015.

Respondents commented on a gradual increase in business activity following the lockdown period during the second quarter.

Service providers often noted that business capacity remained limited and operating costs had risen due to Covid-19 mitigation efforts, while those in the manufacturing sector commented on the likelihood of a slow return to output levels seen prior to the pandemic.

Firms reported a solid rebound in new order volumes in July, especially from domestic customers. Employment numbers continued to fall sharply with the rate of job shedding accelerating since the previous month.

Business sentiment towards the year-ahead outlook remained well above the low point seen in March. Nonetheless, the speed of recovery was moderate.

At 56.6 in July, the flash services Purchasing Managers’ Index improved from 47.1 in June to a five-year high. The reading was expected to climb moderately to 51.5.

The flash manufacturing PMI registered 53.6 in July, up from 50.1 in June. This was the highest since March 2019 and above forecast of 52.0.

“The UK economy started the third quarter on a strong footing as business continued to reopen doors after the COVID-19 lockdown,” Chris Williamson, chief business economist at IHS Markit, said.

“July’s PMI represents a step in the right direction, but there is a mountain still to climb before a sustainable recovery is in sight,” Williamson added.

Elsewhere, data released by the Office for National Statistics showed that logged a double-digit growth in June as non-food and fuel stores continued their recovery from the sharp falls experienced since the start of the coronavirus pandemic.

Retail sales volume advanced 13.9 percent on month in June, faster than the 12.3 percent rise in May and bigger than economists’ forecast of 8 percent.

Growth in sales, excluding auto fuel, improved to 13.5 percent from 10.6 percent a month ago. Sales were forecast to grow 7.5 percent.

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