As UK eases lockdown, services activity expands at fastest pace in 5 years

Output from the UK’s dominant services industry rose at the fastest pace since 2015 in July as more of the nation’s economy opened up after the coronavirus lockdown.

IHS Markit’s Purchasing Managers’ Index rose to 56.5 last month, up from 47.1 in June. While that is marginally below the 56.6 flash estimate, it is well above the 50 level that indicates expansion for the first time in five months.

New orders climbed as firms reopened and business expectations improved for a fourth straight month, Markit said. Employment, however, slumped amid concerns that longer-term demand won’t fully recover to its pre-Covid levels, and new export sales declined.

The data sounds an optimistic note about the economy as Bank of England rate setters prepare to vote on their next policy steps and update their outlook for activity. Policy makers have pointed to the employment outlook as a key area of concern in the coming months.

“These are still the very early stages of recovery and survey respondents often commented on achieving growth from an exceptionally low base,” said Markit’s Economics Director Tim Moore. 

“The weakness of the employment figures reported in July is clearly a cause for concern and likely to hold back the longer-term recovery in business and consumer spending.”

A composite gauge of services and manufacturing also climbed to 57, up from 47.7 in June.