UK economy recovering according to PMI surveys.

uk

The UK economy is recovering according to PMI surveys.  Both manufacturing and services sectors showed growth in orders and business in July.

What are the figures?

The PMI surveys are put together by a research group called IHS Markit. These surveys are considered a respected source of research which asks companies how they are doing. For example they ask whether orders and sales are up or down. Whilst the PMI surveys are not official economic statistics, they are a useful indicator of how things might be going, and are released before the official numbers.

IHS\Markit issue an index number for each survey. If the number is 50 or higher, it means that the economy is growing. If the number is 49.9 or less, it means the economy is contracting.

  • Manufacturing rated as 53.3
  • Services rated as 56.5

The surveys issued this week cover July and follow from the previous week’s estimates.

According to the survey’s Duncan Brock of CIPS, in manufacturing;

“The makers were on the march again in July as production started to flow more easily and businesses saw new orders rise at the fastest pace since the end of 2018….
(However) Export orders fell for the ninth month in a row, exposing the ongoing fragility of the broken global marketplace due to the pandemic.”

And for services;

“The services sector showed a strong return to form at the beginning of the third quarter, with the sharpest rise in overall activity since July 2015 and with new orders making a comeback at the fastest pace since the beginning of the year.”

Unemployment still a worry

So most of the companies surveyed said orders were increasing.  At the same time, many also raised concerns about job levels;

“The employment situation also remained bleak, as job shedding continued and businesses re-modelled their strategies to the shrinking opportunities. With a ravaged economic landscape it will be a slow train to recovery, managing the ebbs of flow of potential disruptions to come.”

“This undoubtedly good news is masking some underlying problems that will still need addressing. Employment fell even more quickly in July as some firms made redundancies in response to worries about the length of the recovery”.

How does this compare with other countries?

So, the UK overall figure was 53.3 for manufacturing and 56.5 for services. How did other similar countries do?

Manufacturing Services
France 52.4 57.3
Italy 51.9 51.6
Eurozone* 51.8 54.7
Germany 51 55.6
USA 50.9 50
Japan 45.2 45.4

Summary

So, although the PMI survey is just that, a survey, it seems likely the UK economy is growing again and starting to recover from Covid related measures.  From this survey it seems the UK recovery may also potentially be stronger than other similar economies so far.

However, the survey authors added on a warning note about future progress;

” As the threat of further pandemic lockdown threatens to derail continuing progress, business will have to continue to absorb any additional costs coming their way or face the prospect of having to close their doors permanently.”

Want to learn more or see where the information came from?

Read the Manufacturing IHS Markit UK press release here.

Click here for the Services IHS Markit UK press release.

Learn more about the IHS Markit PMI surveys here

Learn more about NewsBrokerUK here.

Notes

* Eurozone countries are the 19 EU countries that use the Euro currency.