U.K. Output Expands as Economy Reopening Bolsters Optimism

(Bloomberg) -- U.K. output grew for the first time in five months as restrictions to halt the spread of Covid-19 were eased.

IHS Markit’s flash composite Purchasing Managers Index climbed to 57.1 in July from 47.7 a month earlier, crossing the critical 50 mark that indicates expansion for the first time since February. That’s the strongest reading since 2015 after a sharp since March.

Activity was boosted by people returning to work as bars, restaurants and more shops allowed customers to walk in again. Some survey respondents said clients were beginning to take a longer-term view on spending.

However, services firms warned that capacity was still limited and operating costs had increased, while manufacturers said the return to prior output levels could be slow. Employment also fell as reduced workloads and higher costs prompted firms to shed staff.

“While businesses grew more optimistic about the year ahead, a V-shaped recovery is by no means assured,” said Chris Williamson, chief business economist at IHS Markit. “Consumer-facing businesses remain especially hard-hit by the pandemic and ongoing social distancing.”

The manufacturing output index rose to 59.8 and the services sector activity gauge jumped to 56.6, its fastest acceleration in five years. The survey is a flash estimate based on about 85% of the usual total responses.

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