UK: Solid PMIs round off buoyant week of data - ING

James Smith, a Developed Markets economist at ING, notes that the UK PMIs are the latest indicators to suggest the economy is already in a better place than after the first wave last summer.

"The latest rise in the UK PMIs rounds off what has been a pretty buoyant week for UK data. While the lofty level of the services index, now at 61.8, heavily reflects the recent reopenings, it also paints a picture of consumers and businesses that are more confident in the forthcoming recovery. Most data points – from consumer confidence to transport usage – are now back to, or exceeding, the levels we saw last summer when restrictions were at their lowest."

"Here are a few things that stand out from the latest PMIs:"

"Firstly, hiring is clearly picking up quickly. We know from Adzuna job advert data that the number of adverts in the hardest-hit catering/hospitality sector are now above pre-virus levels, while the PMIs noted the highest employment reading since 2014, putting some pressure on salaries."

"Secondly, the PMIs make it pretty clear that cost pressures are rising and that firms feel comfortable with passing these onto consumers. There was limited evidence of reopening-linked price spikes in the April CPI report, though there’s little doubt that some demand/supply imbalances (amplified by global pressures) will help push inflation above target towards the end of the summer/early autumn."

"Finally, the manufacturing sector has continued to bounce back from the Brexit-related disruption earlier in the year. New export orders were the fastest on record, which is linked to the rebound in global trade. Admittedly, this doesn’t necessarily tell us that UK trade has fully bounced back to its pre-trade deal levels. Official data shows that manufacturing-linked exports to the EU have bounced back more quickly than other products, most notably food/agriculture. And the UK’s share of the total EU’s imports is still lower than it was last year."