LONDON (AFP) – Britain’s private sector economic activity returned to growth in July on the easing coronavirus lockdown, a key survey showed yesterday, lifting hopes of a swift recovery from recession.
The composite purchasing managers’ index (PMI) hit a 61-month peak at 57.1 points in July, registering the fastest expansion since June 2015, compilers IHS Markit and the Chartered Institute of Procurement and Supply (CIPS) said in a statement.
That compared with a June reading of 47.7, which stood below the key 50-level that separates contraction and expansion.
The PMI plunged since March on coronavirus fallout and last stood above 50 in February before the deadly pandemic erupted in Britain.
“July data indicated a marked improvement in business conditions across the United Kingdom (UK) private sector economy following the easing of lockdown measures to contain the spread of the coronavirus disease,” Markit and CIPS added in the statement.
“The latest survey indicated a return to growth for the service sector and a much faster rise in manufacturing production than seen in June.”
Chief Business Economist at IHS Markit Chris Williamson said the data fanned hopes that the broader economy could return to growth in the third quarter or three months to September – but warned that there was “a long way to go”.
“The UK economy started the third quarter on a strong footing as business continued to reopen doors after the COVID-19 lockdown,” noted Williamson.
“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.
“However, while the recession looks to have been brief, the scars are likely to be deep.”
Recent data showed the coronavirus-ravaged economy tanked in the first quarter by 2.2 per cent – which was the biggest quarterly contraction for more than 40 years.
Most economists expect another sharp slump in the second quarter, or three months to June, that would place Britain in a technical recession.
“Even with the July rebound there’s a long way to go before the output lost to the pandemic is regained and, while businesses grew more optimistic about the year ahead, a V-shaped recovery is by no means assured,” added Williamson.
“New orders showed only a relatively small rise in July, indicating that demand remains worryingly low at many firms. Hence July saw yet another sharp cut to employment levels as increasing numbers of companies scaled back their operating capacity.”