UK PMIs Point To Healthy Second Quarter Economic Rebound

Healthy PMIs tally with just about every other UK indicator, which point to economic activity above last summer's levels, when restrictions were comparably low. The biggest danger now comes from the Delta COVID-19 variant, and in particular whether it dampens buoyant confidence levels.

people near Big Ben in London


PMIs point to 5%+ second quarter growth

While the latest UK PMIs are a touch lower than they were last month, it bodes well for a healthy second-quarter growth rebound. The services index dipped to 61.7 from 62.9, while the manufacturing index slipped by roughly one-and-half points to 64.2.

Admittedly the read-across from these PMIs to GDP is still not particularly helpful. But the trend is consistent with other indicators, which from consumer confidence to mobility, show higher levels of activity than we saw after the first wave last summer. We’re now expecting a little-over 5% second-quarter growth, and just shy of 2% in the third.

Importantly this is feeding into stronger hiring appetite, something which the accompanying PMI press release described as “unprecedented”, but is also evident from the number of online job adverts (catering/hospitality is now considerably above pre-virus levels).

Most indicators point to higher activity levels than last summer

Source: Macrobond, ONS, Department for Transport, ING

The major question now, of course, is whether the rapid spread of the Delta COVID-19 variant puts brakes on what’s so far been a vibrant second-quarter recovery.

Our view is that the delay to the final stage of the UK’s roadmap won’t make a huge economic difference – even if it is delayed further (which is possible, given where the cases/hospitalizations data are likely to be by mid-July).

Confidence remains a bigger factor, and the good news, for now, is that the rise in cases doesn’t seem to be affecting consumer optimism. An ONS weekly survey of individuals shows no uptick in concern about the virus, nor the number of people only leaving their home for essential reasons.

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Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

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