UK PMIs: Service sector returns to growth as lockdown end nears
The UK’s services industry returned to growth in March, with business activity, new orders and unemployment all rebounding from the previous month.
New data released this morning shows that the UK’s impressive vaccine rollout had seen the economy recover at a faster rate than initially expected.
The IHS Markit/Cips purchasing managers (PMI) index for services registered 56.3 in March, with any score above the 50 mark indicating growth.
That’s slightly below the flash reading of 56.8. In February, the index had recorded a slight contraction of 49.5.
Today is the first time that the index has posted a score above the 50 mark since October.
Encouragingly for the economy, renewed job creation in March represented the first overall expansion of staffing numbers across the service sector since the pandemic began.
And some firms said that they had seen a boost from higher residential property transactions last month.
However, a continued slump in overseas orders was put down to the combination of existing travel restrictions and continued fallout from the UK’s departure from the EU.
Tim Moore, economics director at IHS Markit, said: “UK service providers were back in expansion mode in March as confidence in the roadmap for easing lockdown restrictions provided a strong uplift to new orders.
“Total business activity increased at the fastest rate since August 2020 and this return to growth ended a four-month sequence of decline.”
After declining 10 per cent last year due to the pandemic, the UK economy is now expected to grow between 5.0-6.0 per cent in 2021.
Howard Archer of the EY Item Club said: “Activity was buoyed in March by preparations for a significant re-opening of the economy from 12 April. The planned easing of restrictions will include the re-opening of non-essential retailers and of some outside hospitality and leisure activities.
“Markit noted that rising levels of activity were linked to a recovery in business and consumer spending, while some parts of the service economy commented on a boost from higher residential property transactions during March.
“Markit also said that survey respondents often commented on pent-up demand and work on projects that had been delayed at an earlier stage of the pandemic.”
The figures show that the UK’s recovery is outpacing that of the Eurozone, which clocked a PMIs score of 49.6 this morning.
Despite the small contraction, it was a considerable improvement on last month’s effort, which came in a 45.7.