The UK’s downturn eased in June, but are green shoots of recovery visible yet?
The Covid-19 pandemic, which has spread to more than 300,000 confirmed cases and tragically caused more than 43,000 deaths in the UK to date, has also taken a heavy toll on the nation's fiscal health, pushing the economy into a deep slump.
However, the downturn caused by the unprecedented health crisis has eased this month, according to closely watched market barometer, The Purchasing Managers’ Index (PMI), produced by IHS Markit, which shows that economic output in the UK rose to a score of 47.6 in the June Flash UK PMI – a four-month high. Although anything below 50 still represents a contraction, it is an improvement on the score of 30 in May, and the all-time low of 13.6 in April.
“June saw a record rise in the PMI for a second successive month, confirming that the economy is moving closer to stabilising after the worst of the immediate economic impact from the Covid-19 pandemic was felt back in April,” says IHS Markit chief business economist, Chris Williamson. The June Flash UK PMI data add to signs that the economy looks likely return to growth in the third quarter, especially given the further planned easing of the lockdown from 4 July, Williamson says.
Manufacturing is leading the recovery, with a PMI score of 50.8. However, the services industry, which includes IT, posted a score of 47 – suggesting it remains in contraction – although this is still significantly higher than May’s score of 29. So, while in general, analysts believe this is good news for the UK economy, in terms of any significant recovery, 2020 as a whole is still likely to be a non-entity. However, 2021 is expected to see more stability and real growth, say PMI analysts.
This data comes hot on the heels of a report from the Institute for Employment Studies (IES), which suggests that the UK job market has now passed the nadir it reached in early May. The number of job vacancies crashed amid the coronavirus pandemic as the employment market and recruitment dried up. More than eight million people have been furloughed by their employers. Yet, in the week to 24 May, new vacancies increased slightly by five per cent or 16,000, according to IES figures, which could suggest that employers are planning for an economic recovery and looking to recruit staff.
The government’s easing of lockdown restrictions; opening non-essential shops earlier in June, introducing a one-metre-plus rule and allowing more hospitality venues to open during July, is expected to bring a further boost to the economy. However, IES data shows that vacancies as yet remain about 67% lower than in the week before the crisis began. So, while it’s time to cultivate the green shoots of recovery, it may take a good deal of time and effort before those green shoots become healthy plants bearing fruit once more.