Latest data released by Markit/CIPS - 23 August 2021

  • Prior 59.6
  • Manufacturing PMI 60.1 vs 59.5 expected
  • Prior 60.4
  • Composite PMI 55.3
  • Prior 59.2

That's quite the miss on estimate for the services sector as the UK recovery momentum is dealt a hit amid supply constraints weighing on overall output. Of note, the services reading and manufacturing output index both are down to six-month lows.

Adding to the mixed picture (and more woes for the BOE) is that prices are still rising sharply and that will be a concern for how consumer inflation will continue to play out in the months ahead, as supply chain issues are expected to persist for longer.

Markit notes that:

"Although the PMI indicates that the economy continues to expand at a pace slightly above the pre-pandemic average, there are clear signs of the recovery losing momentum in the third quarter after a buoyant second quarter.

"Despite COVID-19 containment measures easing to the lowest since the pandemic began, rising virus case numbers are deterring many forms of spending, notably by consumers, and have hit growth via worsening staff and supply shortages.

"Supplier delays have risen to a degree exceeded only once before - in the initial months of the pandemic - and the number of companies reporting that output had fallen due to staff or materials shortages has risen far above anything ever seen previously in more than 20 years of survey history. In manufacturing, sectors including automotive production and electrical goods have fallen into decline due mainly to supply constraints.

"Prices have risen sharply again, albeit with the rate of inflation moving below July's record high, as shortages once again fuelled a sellers' market for many goods and services and wages rose further. "More positively, business expectations for the year ahead perked up in August, encouraging a record jump in employment as furloughed workers were brought back to the workplace. However, demand and supply availability need to improve further for this rise in employment to be sustained in coming months"