'Chipper atmosphere' for services as UK lockdown eases

Will Green is news editor of Supply Management
6 May 2021

UK services growth hit a seven-and-a-half-year high in April in a “chipper atmosphere” following the easing of lockdown restrictions, according to the latest PMI.

Service providers noted the roadmap for easing Covid restrictions had been a key factor in boosting activity, while both business and consumer confidence improved.

The IHS Markit/CIPS UK Services Purchasing Managers’ Index climbed to 61 in April, up on 56.3 in March and against the no-change reading of 50. It was the highest recording since October 2013.

New order volumes increased for the second month running but sales to overseas customers remained relatively subdued, largely reflecting tight restrictions on international travel and hesitancy among clients. Those reporting an increase in export orders mostly cited greater demand from Asia and the US.

Input prices rose at the strongest pace for just over four years, with factors including transport surcharges, staff wages, and the pass-through of higher imported raw material costs by suppliers. This resulted in a robust increase in average charges among service providers.

April saw a sharp rise in employment, while around 65% of survey respondents forecast an expansion in business activity during the next 12 months.

Duncan Brock, group director at CIPS, said: “This chipper atmosphere was build on a solid foundation of the biggest rise in activity since October 2013 as firms enjoyed a deluge of new working following lockdown easing and improved economic conditions.”

He added: “This positive trend in recovery is likely to accelerate in the coming months, but stretched supply chains remain a sticking point, along with inflation potentially biting chunks out of wages and business margins, threatening to put a brake on this fast track to economic normality.”

Tim Moore, economics director at IHS Markit, said: “If the rebound in order books continues along its recent trajectory during the rest of the second quarter, then service sector output growth looks very likely to surpass the survey record high seen back in April 1997.”

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