Business activity in the UK expanded at its fastest rate since 1998 in May as the economy raced out of lockdown, new data today showed.
A flash reading of the IHS Markit Composite PMI, which combines services and manufacturing, came in at 62.0, up from 60.7 in April.
Any score above 50 indicates growth.
IHS Markit said that the UK was enjoying an “unprecedented growth spurt” due to the reopening, but warned that April’s rise in inflation could yet continue.
The best performing sector was manufacturing, which recorded a reading of 66.0, its highest level since 1992.
Steep increases in output, new orders and employment pushed the index to a record level, but severe delays continued across global supply chains.
Services activity also grew, with a score of 61.8, its highest reading since 2013, as a result of the partial reopening of the hospitality sector and roll back of pandemic restrictions, as well as strong rises in spending by both consumers and businesses in May.
Chris Williamson, chief business economist at IHS Markit, said: “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.”
Jai Malhi, Global Market Strategist at J.P. Morgan Asset Management, said: “Today’s UK PMI release showed that last month’s strong reading was not a one-off. With the economic reopening still underway the rise in the manufacturing PMI showed there is still more growth to come.
“Appetite from consumers to spend is clearly booming, but at the same time UK businesses have faced even more acute supply bottlenecks this month – causing input prices to reach their highest level on record.
“This kind of mismatch between demand and supply usually leads to higher prices for the end customer.”
Inflation has ‘further to rise’
Despite the optimism, IHS Markit also sounded a note of caution over the rise in consumer price inflation over the last couple of months.
In April, the rate of CPI more than doubled to 1.5 per cent, driven by a rise in electricity and gas bills.
IHS said that May saw the strongest rate of output charge inflation since the index began nearly 22 years ago.
Williamson added: “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