This month’s Purchasing Managers’ Index (PMI) shows manufacturing has risen in the UK for the second consecutive month. PMI measures activity across the manufacturing sector. The PMI number is 50.1 in June, the first time it has been above 50 since lockdown began. The number 50 is significant as this is the mark that separates between expansion (more than 50) and contraction (less than 50). The services sector continues to shrink, albeit at a lower rate than last month, and has a PMI of 47.
Cause for celebration?
Many have welcomed the news that manufacturing has risen in the UK, claiming it shows the private sector is recovering. The score of 50 comes after a record low of 12.9 set in April – a figure The Bank of England said ‘almost brought the English economy to its knees’. European stock markets are improving following the news, combined with Britain’s FTSE 100 index rising its highest in nearly 2-weeks. However, some claim this increase in production volume was to be expected. These people say the rise in BMI is because operations have resumed across numerous industries as staff return from furlough.
Has manufacturing in the UK risen?
The Guardian newspaper has pointed out that new manufacturing orders continue to fall in June. The newspaper says the UK automotive and aviation manufacturing sectors continue to remain especially weak. The paper said the improvement in activity compared to previous months was not a surprise considering many places were closed. However, UK manufacturers are also showing optimism for the first time in months. Manufacturers are predicting a sustained increase over the next 12-months, believing output will continue to rise.
The new normal post Coronavirus
Whilst many sectors are looking forward to returning to normal, questions are being asked as what ‘normal’ will be. Many companies have significantly changed how they operate, and there are some who believe such changes may become permanent. One such person is John Glen, Britain’s financial services minister. Speaking at an online event held by New Financial – a London-based finance think tank, Mr. Glen said he expected to see changes in Canary Wharf and the City of London. These changes, he said, would see banks reduce physical office space as they “reset” their operations.
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