The output of British services is growing at a faster rate than that of manufacturing for the first time in a year in an indication the UK economy is gearing up for its post-lockdown recovery.
A flash Purchasing Managers’ Index (PMI) from IHS Markit and the Chartered Institute of Procurement and Supply (CIPS) scored 56.6 for services in March – a seven-month high that exceeded the 55.6 result for manufacturing. Anything above 50 indicates growth.
According to government figures, services accounted for 80% of total UK economic output (Gross Value Added) and 82% of employment in July-September 2020.
Growth returns
According to Bloomberg, the data beat economists’ predictions and suggests the most recent winter lockdown had less of an impact on output than previous restrictions.
The data “hints at only a modest contraction of GDP during the first quarter, adding to evidence that the economy has shown far greater resilience in the third lockdown,” said Chris Williamson, chief business economist at IHS Markit.
Opening up
Business activity increased at the fastest pace since August as new orders and confidence rebounded in anticipation of easing lockdown restrictions from the end of March.
According to City AM the figures reflect increased confidence about the UK’s recovery, following a 10% slump in GDP last year — the biggest fall in more than 300 years.
Exports decline
However, export sales were subdued with new orders from abroad declining for a third month in a row.
Manufactures said this was because of delays in supplier deliveries due to a lack of global shipping availability, as well as customs delays following new rules being introduced for trade with the EU following the end of the transition period.
European PMIs
The UK service sector is outperforming its European competitors with the IHS Markit report for the continent saying businesses were still being “constrained by the coronavirus disease, with social distancing restrictions leading to a seventh successive monthly fall in business activity”.
While the headline IHS Markit Eurozone Composite PMI rose from 48.8 in February to 52.5 in March, services remained below the crucial 50 mark at 48.8.
US growth
In the US, service providers recorded the steepest increase in new business for almost three years amid stronger client demand and looser coronavirus restrictions.
The US Services Business Activity Index was at 60.0 last month, with manufacturing also up at 59.