Latest data released by Markit/CIPS – 21 May 2021
Despite a bit of a miss on the headline estimate, this is still a strong report with overall business activity expanding at its quickest pace on record – reflecting strong growth in both services and manufacturing activity as the UK reopening gathers pace.
Pent-up demand is the obvious driver here although strong price pressures are still a downside to note in this report, much like everywhere else at the moment.
Besides that, the manufacturing sector showed a stark improvement which was helped by stronger output – quickest pace since August 2013. However, do take note that higher lead times (15% weightage) also played a role in skewing the reading.
Markit notes that:
“The UK is enjoying an unprecedented growth spurt as the
economy reopens. Factory orders are surging at a record
pace as global demand for goods continues to revive, and the
service sector is reporting near-record growth as the opening
up of the economy allows more businesses to trade. Business
confidence has meanwhile hit an all-time high as concerns
about the impact of the pandemic continue to fade.
“The strongest upturns in demand were reported for hotels,
restaurants and other consumer-facing services, though
improvements were reported across the board in all sectors.
“The output and order book growth seen in May, and record
level of business optimism, are consistent with GDP rising
sharply in the second quarter and for strong momentum to be
sustained through the rest of the year, albeit with the current
quarter likely representing a peak in the growth rate.
“Even with a near-record burst of hiring, the survey saw the
largest ever reported rise in backlogs of uncompleted work
and a severe worsening of supply chain delays as companies
struggled to meet the surge in demand.
“A direct consequence of demand running ahead of supply
was a steep rise in prices, hinting strongly that consumer price
inflation has much further to rise after lifting to 1.5% in April.
However, the inflationary spike could prove temporary, as
many of the price hikes have reflected surcharges on shipping
and other shortage-related issues emanating from the
pandemic. As these constraints ease, price pressures should
abate, but there remains a great deal of uncertainty as to
how long it will take for global business and trade to return to
normal functioning, especially if new virus variants appear.”