UK Manufacturing PMI unexpectedly rose above 50 points in June

According to the report from IHS Markit / CIPS, June data indicated a vastly improved overall picture across the UK private sector, with the downturn in total business activity continuing to steady after the record rate of decline seen at the height of the lockdown during April. Another drop in service sector activity contrasted with a return to production growth among manufacturing companies in June.

The headline seasonally adjusted Flash UK Composite Output Index - which is based on approximately 85% of usual monthly replies – rose to 47.6 in June, from 30.0 in May. The latest reading was below the 50.0 no-change threshold, but signalled the slowest pace of decline since the start of the downturn in March.

Looking at the month-on-month change in the headline index, the rise since May (+17.6 points) was the largest since the start of the series in January 1998, which highlighted a decisive shift in momentum. At the same time, private sector firms also signalled a rebound in business expectations for the year ahead, with confidence reaching a four-month high in June.

Survey respondents mainly noted that the easing of restrictions related to the coronavirus disease 2019 (COVID-19) pandemic had a favourable impact on economic activity, with business operations gradually resuming in a number of sectors and staff brought back from furlough. However, there were also widespread reports that underlying demand remained very subdued and cutbacks to client spending had acted as continued drag on overall business activity. 

The seasonally adjusted Flash UK Manufacturing PMI – a composite single-figure indicator of manufacturing performance – posted 50.1 in June, up from 40.7 in May and fractionally above the neutral 50.0 value. Moreover, the manufacturing output index also moved back into growth territory (50.8), which ended ending a three-month period of decline. 

June data indicated a much slower reduction in service sector activity than that seen in the previous month. This was highlighted by a rise in the seasonally adjusted IFlash UK Services PMI to 47.0, up from 29.0 in May. The latest reading signalled the slowest pace of decline in service sector output since the start of the downturn in March.