According to the PMI DATA for March, the UK economy is springing back to life and creating more jobs for the first time since February.
Employment Increases This Year
The Manufacturing PMI read at 57.9, above the 55.0 forecast and 55.1 reported in February. The Services PMI – which covers the largest component of the UK economy – read at 56.8, above the consensus expectation for 51.0 and February’s reading of 49.5.
Taking the two together and rebalancing the data to give a better snapshot of the broader economy gives us the Composite PMI which read at 56.6, which is well above 51.1 expected and the 49.6 reported in February.
A reading below 50 represents contraction, a reading above represents expansion. Therefore, the inference is that the economy is rebounding and is doing faster than economists and the market expected.
IHS Markit says the rebound inactivity was the fastest recorded in seven months, fuelled by a rise in new orders for the first time since September 2020.
Survey respondents attributed to a rebound in sales ahead of easing lockdown measures, alongside stronger consumer confidence and a surge in demand for residential property services.
For the first time since the start of the pandemic, service sector activity (index at 56.8) outpaced manufacturing production growth (55.6).
The survey reveals the government’s roadmap for fewer stringency measures in the coming months contributed to the strongest rise in total new work since August 2020.
Service providers noted forward bookings from domestic consumers, while some manufacturers cited advanced orders from hospitality businesses and high-street retailers.
However, exports remain a sore spot for the economy as the survey reveals export sales remained relatively subdued with total new orders from abroad falling for the third month running.
Efforts to rebuild business capacity and respond to rising customer demand contributed to an increase in private sector employment during March.
This finding chimes with official ONS employment data out on Tuesday that showed the UK’s unemployment rate actually fell to 5.0% in January, leading some economists to suggest the peak in unemployment might already be in.
The PMI report shows the uptick in employment in March represented the first upturn in staffing numbers since February 2020 and the rate of job creation was the fastest for nearly two years.
“The encouraging readings on future expectations, job creation and new order inflows meanwhile all point to robust economic growth in the second quarter, especially if virus restrictions are lifted further,” says Chris Williamson, Chief Business Economist at IHS Markit.
The survey reveals that inflation could rise over coming weeks and months as positive trends for output, new work and staff hiring were accompanied by another round of steep input cost inflation during March.
The latest increase in average cost burdens was the sharpest since February 2017. Private sector companies continued to pass on greater operating expenses to clients, as signaled by an acceleration in output charge inflation rate to its highest for over three years in March.