UK Private Sector Expands Most Since 2013

The UK private sector grew at the fastest pace since late 2013 as both manufacturing and service sectors recovered in August following the reopening of the economy after the lockdown, flash data from IHS Markit showed Friday.

The IHS Markit/Chartered Institute of Procurement & Supply flash composite output index climbed to 60.3 in August from 57.0 in July. A score above 50 indicates expansion.

The index signaled the fastest growth since October 2013 and the reading was also above economists’ forecast of 57.1.

The manufacturing sector grew at a slightly faster pace than service sector activity in August. The flash manufacturing Purchasing Managers’ Index hit a 30-month high of 55.3 versus July’s 53.3.

At 60.1, the flash services PMI came in at 72-month high in August and up from 56.5 in July.

Total volumes of new work expanded for the second month running in August, with the latest increase the fastest since mid-2014. However, concerns about the speed and duration of the recovery resulted in sustained job cuts across the private sector.

Despite a slowdown in inflation, average cost burdens increased strongly in August. Survey respondents noted that higher fuel bills and rising costs for imported items had pushed up operating expenses, which was only partially offset by higher average prices charged.

Further, business optimism eased slightly since July as some manufacturers cited worries about the sustainability of the recovery over the longer term.

The survey provided further evidence that the recovery continued at a strong pace in the third quarter, Ruth Gregory, an economist at Capital Economics, said. Even so, rising unemployment is likely to put a brake on the recovery later this year.

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