UK business activity continued its rapid growth in June as the post-Covid reopening boom continued apace, new figures today suggested.
A flash reading of the IHS Markit Composite PMI, which combines services and manufacturing, came in at 61.7, down from 62.9 in May. Any score above 50 indicates growth.
Despite the continued expansion, today’s readings were the lowest in the last two months. Both manufacturing and services sectors’ individual readings slipped back from last month’s record readings.
But even with the slight slip the readings show some of the “strongest monthly improvements in business activity across the private sector since 1998”, IHS Markit said.
It said that the rapid growth had led firms to hire staff at “an unprecedented rate” over the last month to handle the boom.
But for the fifth month running the rate of input cost inflation increased, adding to concerns that the rapid recovery could see consumer price inflation surge in the coming months.
Last month inflation hit 2.1 per cent, above the Bank of England’s 2.0 per cent target, due to a surge in fuel and clothing prices.
Chris Williamson, Chief Business Economist at IHS Markit, said: “Businesses are reporting an ongoing surge in demand in June as the economy reopens, led by the hospitality sector, meaning the second quarter looks to have seen economic growth rebound very sharply from the first quarter’s decline.
“There are some signs that the rate of expansion appears to have peaked, as both output and new order growth cooled slightly from May’s record performances, but full order books and a further loosening of virus-fighting restrictions should nevertheless help ensure growth remains strong as we head through the summer.”
Rhys Herbert, senior economist at Lloyds Bank said that although the figures continued to show that the strong recovery was ongoing, there were some indications that constraints were beginning to hold back growth.
“Too much should not be read into the dip in the June headline figure as it follows several months of sharp rises, which has left the level close to record highs”, he said.
“Nevertheless, it may be a tentative sign that near-term constraints, with sectors now reporting shortages of labour, continued disruptions in the supply chain and rising cost pressures, are starting to hold back output.”
In the Eurozone, business growth accelerated at its fastest pace in 15 years as the post-lockdown boom, which has been slower to reach Europe, finally arrived.
The composite reading for the region came in at 59.2, up from 57.1 in May, its highest reading since June 2006.
More to follow.