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A Productive June Fuels Hopes of a Fast Economic Recovery

After weeks of economic gloom, the lifting of certain restrictions in the UK has coincided with encouraging data from June to date. Could the recovery turn out to be faster than expected?

What Has Happened in June?

The IHS Markit figures for this month show a UK PMI of 47.6. This is still below the crucial 50 mark, but it contrasts to sharp falls in previous months. For example, in May the PMI was just 30.

The services industry remained the weakest part of the UK economy. Its PMI rose from 29 in May to 47 in June. This number suggests that it is still shrinking. On the other hand, the manufacturing sector was more positive, as production volumes rose due to the re-opening of factories and the PMI went from 40.7 to 50.1.

New orders declined in June, though, with the work carried out so far in the month mainly aimed at clearing a backlog of existing orders. This situation has led to a greater demand for international debt collection services, as companies look to recover money that they are owed.

A similar story was seen across Europe. From a 31.9 score in May, the Eurozone PMI rose to 47.5 in June. It is worth remembering that a sequence such as 50 – 30 -50 would refer to an L-shaped trend rather than a V-shape, so further recovery is needed before the economy can be said to be on the right track again. A score of 50 means no change from the last month.

Analysts have pointed out that it is difficult to interpret this data, as there is a feeling that those who responded to the survey may have rated June’s activity against normal levels, rather than the comparison to May that was needed. This has led to a figure under 50 that suggests contraction, when experts believe that June was probably actually better than May.

What Can We Expect Now?

It is generally felt that the further easing of lockdown conditions that we have seen in June will have given the ailing economy a boost. With pubs, restaurants and hairdressers going back to work and the distancing measures halved, there is real hope that the rest of June provides positive numbers.

In terms of the stock market, the gradually improving economic conditions have led to rising prices in the UK and across Europe.

There have also been reports of a number of banks planning to lower their amount of office space in London. Financial services minister John Glen pointed out that some banks will “reduce their physical footprint” in the City of London. It isn’t yet clear whether this will mean more home-working opportunities for staff.

British car manufacturing remains mired in gloom, as the Society of Motor Manufacturers and Traders (SMMT) said that one in six jobs in the industry are at risk. They put this down to low levels of demand and social distancing making it difficult to increase productivity levels.

It was also pointed out that a lot of businesses have lowered their prices to try and get more orders. This has led to a squeeze on profit margins, especially when taking into account the extra costs in adapting to current safety measures.