Latest data released by Markit/CIPS - 21 May 2021
- Prior 61.0
- Manufacturing PMI 66.1 vs 60.8 expected
- Prior 60.9
- Composite PMI 62.0 vs 61.9 expected
- Prior 60.7
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."