UK composite output index declined moderately in June

According to the report from IHS Markit/CIPS, June saw further strong growth in output across the UK private sector. The overall expansion in activity was only slightly slower than the record posted in May and among the fastest since the series began in January 1998. Marked increases in output were seen across both the manufacturing and service sectors as the economy continued to reopen following the COVID-19 lockdown earlier in the year. Companies responded to rising workloads by taking on extra staff at an unprecedented rate at the end of the second quarter. Also hitting previously unsurpassed levels, however, were rates of inflation of input costs and output prices as supply-chain disruption fuelled price pressures.

The headline seasonally adjusted UK Composite Output Index registered at 61.7 in June, down slightly from May's record reading of 62.9 but still pointing to one of the strongest monthly improvements in business activity across the private sector since 1998. New orders continued to surge, with marked increases seen across both monitored sectors. The rate of expansion in new export orders remained much softer than that seen for total new business, however, amid a second successive reduction in services new business from abroad. Companies responded to rising workloads by taking on extra staff in June. Moreover, the rate of job creation quickened to the strongest in the series history. The rate of input cost inflation accelerated for the fifth month running and was the joint-fastest on record, equal with that seen in June 2008. While inflation continued to be led by the manufacturing sector, service providers also posted a marked increase in input prices. In turn, the rate of output price inflation hit a fresh record high for the second month running.

Looking ahead, companies remained confident that output will increase over the next 12 months as the recovery from the COVID-19 pandemic continues. Optimism was signalled at manufacturers and service providers alike. That said, overall sentiment eased to the lowest in five months.