Lifting lockdown brings surge of exercise for UK corporations – PMI

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© Reuters. FILE PHOTO: People walk across Millennium Bridge with the City of London financial district seen behind, amid the coronavirus disease (COVID-19) pandemic, in London

By Andy Bruce

LONDON (Reuters) – A deluge of new orders swept through British businesses in April as the country lifted some of its COVID-19 restrictions, according to a survey on Friday that pointed to a rapid rebound for the pandemic-hit UK economy.

The preliminary “flash” reading of the UK Composite Purchasing Managers’ Index (PMI) rose to 60.0 in April from 56.4 in March, its highest reading since November 2013. A Reuters poll of economists had pointed to a smaller rise to 58.2.

The survey added to signs that the world’s fifth-biggest economy, which shrank by nearly 10% in 2020, is shaping up for a rapid recovery helped by the fast rollout of COVID-19 vaccinations.

Non-essential retailers in England reopened on April 12 along with pubs and restaurants operating outdoors, and from May 17 more restrictions are due to be lifted to allow indoor hospitality, performances and sporting events.

Both services and manufacturing companies increased staffing this month in preparation, the PMI survey showed.

“Companies are reporting a surge in demand for both goods and services as the economy opens up from lockdowns and the encouraging vaccine roll-out adds to a brighter outlook,” said Chris Williamson, chief business economist at IHS Markit, which compiles the survey.

“In more than 23 years of PMI history, we have only seen one spell of faster growth than this, recorded between August and November 2013.”

The evidence of momentum in Britain came after data unexpectedly showed the euro zone economy also picked up pace April, despite slower progress in vaccinating the bloc’s population.

INFLATION UNCERTAINTY

The PMI for Britian’s services sector rose to 60.1 in April from 56.3 in March, the highest reading since August 2014.

“By far the strongest momentum was seen among consumer services, driven by the reopening of some customer-facing parts of the economy in England and Wales,” IHS Markit said.

The PMI for the manufacturing sector, which accounts for around 10% of British economic output, rose to its highest since 1994 at 60.7, up from 58.9 in March.

As in previous months, the reading was flattered by the way the survey interprets supply chain delays caused by the pandemic and to a lesser extent Brexit, which in normal times would reflect strong demand.

Both manufacturers and services companies reported rapid increases in cost pressures – something the Bank of England will be keeping an eye on as it monitors the economic recovery.

“These prices will inevitably feed through to higher inflation as we head into the summer, though there’s much uncertainty as to how long the inflationary impact will last,” Williamson said.

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