U.K.’s flash PMI indices continue to rebound in July, but employment index remains soft

The U.K. PMIs continued to rebound from the April lows with both the manufacturing and services readings recording marked rises in July, greatly surpassing market expectations. The construction PMI data for the month of July is not due until the 6th August. Nevertheless, based on the reading for June, which was 55.3, the latest outturns of all three PMIs are currently above the key-50 mark which separates contraction from expansion.

Respondents throughout both the July surveys underlined the continued easing in lockdown restrictions as a key factor behind the further rebound in activity this month, noted Lloyds Bank in a research report. Throughout the services sector, this was especially clear in the headline balance, which rose from 47.1 to 56.6, hinting at the most rapid rate of growth in five years.

A rebound of a similar magnitude was marked throughout the manufacturing sector, where the activity balance rose to 59.8 from prior month’s 50.7. The rise was led by a sharp rise in new orders, similar to that seen in services. Nevertheless, with the headline balance of the manufacturing PMI being a composite measure, developments elsewhere meant that the overall reading recorded a much more measured rise to 53.6 from 50.1.

Markedly, the component breakdown on the manufacturing PMI showed only a modest rebound in the employment sentiment, which rose to 43.3 from 41.4. This indicates towards a further reduction in headcount. A similar message was seen in the services PMI, implying a more rapid rate of job shedding in July relative to June.

“Overall, therefore, while the headline balances of the PMIs pointed to a strong near-term improvement in sentiment  – consistent with the ongoing reopening of the economy – broader confidence was less strong suggesting that firms were still somewhat cautious over how sustained the near-term improvement in activity will prove to be”, added Lloyds Bank.