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Economy

April PMI data shows UK economy is recovering rapidly

The UK private sector is expanding at the fastest rate since late-2013 as the end of lockdown restrictions triggered a surge of activity across all major sectors.

IHS Markit’s headline UK Composite Output Index registered a reading of 60.0 in April 2021, which is an 89-month high.

It marks the second consecutive month of growth for the private sector and signals that the UK economy is recovering strongly from the downturn in January and February.

Services activity expanded to the greatest extent month-on-month, reaching an 80-month high reading of 60.1.

This is in line with the reopening of consumer-facing services and non-essential retail on April 12.

Survey respondents overwhelmingly attributed higher levels of services output to the improving pandemic situation.

Positive sentiment about the UK economic outlook also helped to boost private sector employment, with the latest data pointing to the steepest rate of job creation since August 2017.

Manufacturing activity also expanded during April led by the fastest rise in new orders since November 2013.

The Flash UK Manufacturing PMI registered a 60.7 reading, which is a 321-month high (July 1994).

The exceptionally high reading partly reflected a rapid lengthening of supplier’s delivery times.

Production volumes increased to the greatest extent since last August, with particularly strong momentum seen among food and drink manufacturers due to the reopening of hospitality businesses.

The April data signalled that rapid cost inflation persisted across the UK private sector, led by higher fuel bills, staff wages, commodity prices and freight surcharges.

A combination of greater operating expenses and stronger customer demand meant that average prices charged continued to increase at one of the fastest rates for the past three-and-a-half years.

Chris Williamson, chief business economist at IHS Markit, said: “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.

“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.

“Business activity should continue to grow strongly in May and June as virus restrictions are eased further, setting the scene for a bumper second quarter for the economy.”

Duncan Brock, group director at CIPS, added: “There were signs of hope in abundance in April for the UK economy as private sector businesses forged ahead confidently, lifted by strong rises in output, orders and jobs.

“The energy behind pipelines of new work came mainly from domestic clients as lockdown limitations were reduced.

“Whilst business volumes expanded, supply chain performance remained under par and 57 per cent of UK manufacturers reported longer waiting times.

“Suppliers gave both Brexit and covid-related reasons for slower response times but as 67 per cent of respondents said they were paying more for manufacturing inputs continuing inflationary pressure may dampen ongoing recovery in the sector.”