Activity in the UK’s private sector grew at its sharpest pace since 2013 in August, with new data indicating a faster-than-expected recovery from the coronavirus pandemic in both the manufacturing and services sectors.
The composite purchasing managers’ index (PMI) reading from IHS Markit’s closely watched survey came in at 60.3, well ahead of analyst forecasts and above July’s figure of 57.
PMIs are an indicator of private sector activity and are given on a scale of 1 to 100. Anything above 50 signals growth, while anything below means contraction.
“August's data illustrates that the recovery has gained speed across both the manufacturing and service sectors since July,” said Tim Moore, economics director at IHS Markit.
“The combined expansion of UK private sector output was the fastest for almost seven years, following sharp improvements in business and consumer spending from the lows seen in April.”
At 61.6, the reading from the manufacturing sector came in slightly ahead of the services sector’s 60.1.
Both sectors benefitted from a surge in consumer and business spending as the UK government continued to ease its sweeping coronavirus restrictions.
The services sector is hugely important to the UK economy — it includes finance, law, retail, engineering, and hospitality — and makes up about 80% of the country’s economic output.
Firms in the services sector reported a boost from the government’s Eat Out to Help Out scheme, noting that it had brought more consumers back to restaurants and pubs.
Total volumes of new work in both sectors expanded for the second month in a row, with the latest increase the fastest since July 2014, IHS Markit said.
But job cuts continued unabated across the private sector in August, with firms citing concerns about the speed and duration of the economic recovery.
Staffing numbers fell at their sharpest pace since May, as companies tried to reduce overheads before the government winds down its wage-subsidy scheme.
“As the UK heads for the deepest recession in living memory, any celebration is premature as firms moved from the protection of furlough schemes to the harsh reality of job shedding,” said Duncan Brock, the group director at the Chartered Institute of Procurement and Supply.
“Reducing headcount was a quick fix for many firms struggling to maintain strong supply chains and their position in the marketplace amidst higher raw material and import costs,” he said.
For similar reasons, confidence about future growth also fell for the first time since March.
The PMI data follows stronger-than-expected UK retail sales data.
The Office for National Statistics said on Friday that the volume of retail sales rose by 2% between in July. Analysts had expected a month-on-month increase of just 0.2%.
Retail sales in July were also 4.4% higher than February, meaning that they have recovered over and above pre-pandemic levels.