A rise of more than one point in the service sector purchasing managers’ index signalled a strong start to the second quarter, and suggested that growth across all sectors has returned to its strong rates of last autumn. Markit, which produces the PMI surveys, says the PMIs are consistent with 0.8% growth, at least.
The official view, interestingly, is that growth will slow. The Office for Budget Responsibility’s March forecast was for 0.7% first quarter growth, 0.6% in the second quarter. The first quarter was 0.8%, and the second quarter is heading that way.
Here is more from Markit on the PMIs:
“The April PMI surveys signalled a strong start to the second quarter, signalling an acceleration in the rate of economic growth to the fastest since last November and one of the highest rates of growth seen in the survey history. With the outlook brightening, the pace of job creation hit a record high.
“The three Markit/CIPS PMI™ surveys collectively signalled an expansion of private sector business activity for a sixteenth successive month in April, with the ‘all sector’ Output Index rising from 58.2 in March to a five-month high of 59.4. The latest reading has only ever been exceeded since the survey began in the late-1990s by those seen in the four months to last November.
“Historical comparisons indicate that the April reading is consistent with the economy growing at a quarterly rate of 0.8%. Such a rate of growth in the second quarter would lift gross domestic product above its pre-recession peak, extending further the strongest spell of economic growth that the country has seen since the financial crisis struck.
“The upturn also remains reassuringly broad-based, with strong growth recorded in manufacturing, services and construction. Only construction saw an easing in the rate of expansion, to a six-month low, but recent prior months had seen near-record rates of increase. The survey also showed ongoing strong growth across all construction sectors, not just house-building.
“In services, business activity grew at the sharpest rate seen so far this year, but it was manufacturing which saw the strongest increase, reporting the third-largest monthly rise in production seen since the manufacturing survey began in 1992.
“The data are broadly consistent with services output growing at a quarterly rate of 1.0%, rising to 1.5% in manufacturing and 3.0% in construction. However, although seeing the weakest growth of the three sectors, it’s the services sector which, due to its sheer size, will again provide the main driving force behind the economy in the second quarter.
Record spell of job creation continues: “The April survey also showed that companies took on staff at the fastest rate seen in the 16-year history of the survey, suggesting employment is growing at a rate of approximately 100,000 per month.”
This piece is cross-posted from EconomicsUK with permission.