U.K.’s flash PMIs for May saw marked rebounds, recovering from the falls to record lows seen in April. The ‘flash’ manufacturing PMI rose to 40.6 in May from April’s 32.6, while the services PMI index rose to 27.8 from 13.4 in April. This drove a rebound in the composite PMI index to 28.9 from 13.8 seen in April. However, these rises come after a month of record falls in April as the U.K. went into full lockdown mode.
This signifies that some rebound in the headline balances was always likely, noted Lloyds Bank in a research report. However, with the PMIs staying well below the 50-mark, the latest readings imply that the overall level of economic activity dropped further in May, compared to April.
Markit stated that its latest readings imply that “the UK remains firmly locked in an unprecedented downturn, with business activity and employment continuing to slump at alarming rates in May”. The Bank of England, in its recent Monetary Policy Report, expected a 30 percent contraction in U.K. GDP in the first half of 2020, with the fall in the second quarter alone likely to be in the region of 25 percent.
“Ultimately, the outlook for the UK economy remains highly contingent on the rate at which lockdown restrictions are eased back (both at home and abroad) and how quickly economic confidence recovers. Notably, expectations for future activity rose sharply in the latest survey, likely in reaction to UK PM Johnson’s speech on 10th May, in which he announced plans to ease the lockdown in a three-step process, given that the responses to the May surveys were collected between 12-19 May”, added Lloyds Bank.