When surveys start concluding that certain vital sectors of the UK economy are enjoying the best growth rate since 2006, you know you need to start taking things more seriousl according to Micheal Baxter in this excellent blog (full version here)
As he puts it “Until recently the UK recovery looked – how can one put it? – well, it looked quite nice. Surveys and hard data pointed to growth; they suggested that the UK was comfortably clear of recession territory, but there was always that reminder that the recovery was really quite lacklustre compared to what it was like before 2008. But then yesterday and this morning it changed. Not one, but two surveys have seen the light of day in the last 24 hours, which suggest that certain vital sectors are now seeing their best performance since 2006.
The latest data says the UK economy expanded by 0.5 per cent in Q2, compared to 0.3 per cent in Q1. So that’s an improvement, but the fact is that 0.5 per cent growth is not that good. At this stage in the economic cycle, with the economic output so far behind potential, the economy should be booming.
Hold that thought. Four surveys have seen the light of day since last Thursday, and between them they suggest that the UK economy is finally growing the way it should be – it may even be close to booming.
First off, there was the latest Purchasing Managers’ Index produced by Markit/CIPS for manufacturing. The index rose to a 28 month high in July, with a score of 54.6 – with any score over 50 supposedly denoting growth. This was the best bit from the report: “New export business rose at the fastest pace for two years, reflecting increased sales to Australia, China, the euro area, Kenya, Mexico, the Middle East, Nigeria, Russia and the US.”
Second off, we got the latest Purchasing Managers’ Index, again from Markit/CIPS, this time for construction. The index pointed to the fastest rate of residential construction since June 2010 and the steepest improvement in new order levels since April 2012.
So far the story is okay. Surveys point to an economy improving, but at best they only suggest the performance is comparable to what we saw in 2011, maybe late 2010. But the UK economy was not in good shape back then, so big deal. The UK economy is not as terrible as was in 2012, but it is as bad as it was in 2011.
But then yesterday the story became altogether more promising. The latest Purchasing Managers’ Index for services rose to its highest level since 2006. In fact with the headline seasonally adjusted Business Activity Index standing at 60.2, it was the highest reading since December 2006.
But even that is not the best bit. July also saw the sharpest rise in backlogs of work since February 2000. Now when backlogs rise, you can normally expect output to rise in the following months to try to catch-up. In other words, if anything, the next few months should be even better. Collectively, the three PMIs point to quarter on quarter growth of 1.5 per cent. If that proves right, the UK will have enjoyed its fastest growth rate in 14 years.
Finally, this morning saw a survey from the British Retail Consortium indicating that retail sales rose by 3.9 per cent in July, which is the best year on year rise since 2006.
Okay, there are snags. For one thing much of the expansion appears to be fed by UK households saving less, and borrowing more. Not everyone welcomes this development.
For another thing one-offs partly explained July’s retail growth: with the good weather and sporting success being cited for reason for higher sales.
But lurking in the data are signs of something that may be more permanent. The rather unfortunate timing of the economic depression in the UK’s largest export market – the Eurozone –has really not helped things. It is encouraging that there are signs that the UK is exporting more outside the euro area.”
So, let’s enjoy the moment especially in Manchester where – The latest Manchester Monitor, produced by New Economy, shows things are getting better.
The full report is now available to view here and it is a reliable monthly analytical snapshot of Greater Manchester’s economic well-being.
The August 2013 edition highlights how Greater Manchester’s Job-seeker’s Allowance (JSA) claimants have now declined for the fourth month in a row. It points out that although the ongoing decline is welcome news, 4.5 per cent of Greater Manchester’s population are still claiming JSA (compared with the national average of 3.5 per cent), highlighting the economic challenge that remains.
So things across the UK looking better – but perhaps not as rosy as some would have us believe.