Growth in the UK’s private sector hit a five-year high in July following a “surge” in business activity that will raise hopes of a strong recovery from the depths of the coronavirus crisis.
The composite purchasing managers’ index (PMI) reading from IHS Markit’s closely watched survey came in at 57.1, far ahead of expectations and significantly above June’s figure of 47.7.
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.
A reading of 56.6 for the services sector “indicated that business activity was firmly in growth territory during July,” according to IHS Markit.
But while the rise in activity came as an easing of coronavirus restrictions allowed many businesses to reopen, there were also reports that initial demand was weaker than expected, it said.
And despite the growth, there was a continued decline in staffing levels across the services sector, with around a third of survey respondents reporting a fall-off in employment during July.
The services sector is hugely important to the UK economy — it includes finance, law, retail, engineering, and consulting — and makes up about 80{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of the country’s economic output.
“The UK economy started the third quarter on a strong footing as business continued to reopen doors after the COVID-19 lockdown,” said Chris Williamson, the chief business economist at IHS Markit.
“The surge in business activity in July will fuel expectations that the economy will return to growth in the third quarter after having suffered the sharpest contraction in modern history during the second quarter.”
