U.K. Activity Accelerates as Firms Prepare for Lockdown Lifting

(Bloomberg) -- U.K. business activity increased at the fastest pace since August this month as new orders and confidence rebounded in anticipation of easing lockdown restrictions.

IHS Markit’s flash composite Purchasing Managers Index climbed to 56.6 in March, beating economist estimates and registering above the critical 50 mark that indicates expansion for the first time this year. Services activity outpaced manufacturing production growth for the first time since the start of the pandemic, separate gauges showed.

Employment rose for the first time in over a year, supported by the highest levels of business expectations for the 12 months ahead since Markit began collecting the data in 2012. Input costs also increased, with firms passing on expenses to clients.

The data “hints at only a modest contraction of GDP during the first quarter, adding to evidence that the economy has shown far greater resilience in the third lockdown,” said Chris Williamson, chief business economist at Markit. “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.”

The overall pace of growth is likely to be curbed by ongoing restrictions for some time to come though, especially if the U.K. experiences a new wave of Covid infections, he said. Export sales were subdued with new orders from abroad declining for a third month and manufacturers were hit by delays in supplier deliveries due to a lack of global shipping availability and customs delays.

The survey is a flash estimate based on about 85% of the usual total responses. Data was collected March 12-22.

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