Press release

23 Apr 2021 London, GB

Flash April purchasing managers survey indicates strong start to second quarter as restrictions eased – EY ITEM Club comments

Encouraging news on the UK economy, with the flash purchasing managers survey appearing to indicate a strong start to the second quarter.

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Related topics Growth COVID-19
  • Encouraging news on the UK economy, with the flash purchasing managers survey appearing to indicate a strong start to the second quarter
  • Joint services and manufacturing activity grew at the fastest rate for 89 months in April as restrictions were eased. The composite output index rose further to 60.0 in April, following an increase to 56.4 in March from 49.6 in February – now significantly above the 50.0 level that indicates flat activity
  • The services sector grew at the fastest rate for 80 months in April as it particularly benefited from the easing of restrictions. The services PMI improved to 60.1 in April, an increase from 56.3 in March, 49.5 in February and an eight-month low of 39.5 in January
  • The manufacturing sector grew at a very healthy rate in April, with the manufacturing PMI improving to a 321-month high of 60.7 from 58.9 in March
  • Joint new services and manufacturing orders grew at the fastest rate for nearly seven years, primarily due to an increase in domestic demand. Employment rose for a second consecutive month, the fastest increase since August 2017
  • Confidence remained close to March’s level – the highest since the series began in July 2012 – primarily reflecting hopes that the COVID-19 vaccination roll-out would boost economic activity over the longer-term
  • However, there are still concerns about supply chain delays among manufacturers
  • With Q1 likely having seen a slower contraction than had originally been anticipated, and with the economy appearing to be on the front foot at the start of Q2, the EY ITEM Club will be substantially raising its current 2021 GDP growth forecast of 5.0% in its Spring Forecast – released on 26 April
  • Consumers look well-placed to play a leading role in the UK recovery given the recent high savings ratios and with unemployment likely to rise much less than previously expected. After an extended period of weakness, business investment is expected to gain momentum over the course of the year as companies grow more confident in the economy and their own prospects
  • The Government’s road map out of lockdown appears to have lifted business and consumer confidence, with further reinforcement by the near-term supportive measures contained in March's Budget.

Howard Archer, chief economic advisor to the EY ITEM Club, comments:

“The ‘flash’ purchasing managers’ survey for the UK manufacturing and services sectors indicated that overall activity rose appreciably in April. The economy benefited from a significant easing of restrictions on 12 April, particularly helping the services sector.

“The composite output index for manufacturing and services improved to an 89-month high of 60.0 in April from 56.4 in March, 49.6 in February and an eight-month low of 41.2 in January. This took the composite output index significantly above the 50.0 level that indicates flat activity.

“Joint new orders grew for a second successive month and at the fastest rate for nearly seven years. This was primarily due to a pick-up in domestic demand, amid reports that export demand remained ‘subdued’.

“Employment rose for a second month running after a year of contraction, and at the fastest rate since August 2017.

“Another positive development saw confidence remain close to March’s level – the highest since the series began in July 2012. This primarily reflected hopes that the economy will see robust growth as restrictions are eased in line with the government’s roadmap. 

“Input prices rose at a strong rate, attributed to higher fuel bills, staff wages, commodity prices and freight surcharges. This led to output prices rising at one of the fastest rates for nearly four years as companies looked to pass on their increased costs.

“There are still concerns about supply chain delays among manufacturers.”

April services PMI points to fastest growth for 80 months      

Howard Archer continues: “Services activity picked up markedly in April to grow at the fastest rate for 80 months, as it particularly benefited from the easing of restrictions on 12 April. According to Markit, the strongest momentum was seen among consumer services, driven by the reopening of some customer-facing parts of the economy in England and Wales. Markit also reports that business services increased at a strong pace in April, reflecting rising confidence towards the UK economic outlook.

“Looking at the numbers, the services PMI rose to 60.1 in April, after increasing to 56.3 in March from 49.5 in February and an eight-month low of 39.5 in January.

“New business in the services sector grew for a second successive month in April and at the fastest rate since March 2015, boosted by advance bookings for hotels, restaurants and other consumer services in response to the roadmap for lifting pandemic restrictions. Backlogs of work rose at the fastest rate for nearly six years, while employment rose at the fastest rate since August 2017.”

Manufacturing PMI at 321-month high

Howard Archer comments: “The ‘flash’ purchasing managers survey pointed to the manufacturing sector expanding at the fastest rate for 321 months in April. The PMI rose to 60.7 in April from 58.9 in March, 55.1 in February from a three-month low of 54.1 in January.

“While Markit noted the manufacturing PMI saw elevated output, new orders and employment indices, it reported that ‘the exceptionally high PMI reading also reflected another rapid lengthening of suppliers' delivery times during April’.

“Output growth improved significantly to an eight-month high in April with the index rising to 59.1 from 56.6 in March and a nine-month low of 50.5 in February. Food and drink manufacturers saw particularly strong growth due to the reopening of hospitality businesses.”