Hopes rise of a V-shaped recovery
Businesses grow at fastest pace for five years while rebound in car sales fuels optimism for the economy
BRITAIN’S crucial services sector grew at its fastest pace for five years last month as customers rushed out to spend money, fuelling hopes of a rapid “V-shaped” bounceback.
Car sales also jumped as delayed purchases of new vehicles were able to go ahead, while more bricks were bought as construction sites ramped up work, and visits to shops rose in a sign of growing consumer confidence.
Restaurants, meanwhile, reported soaring bookings following the launch of a government voucher scheme.
It will trigger fresh speculation over a V-shaped economic recovery, in which GDP bounces back after what is likely to have been the country’s steepest recession in centuries.
However, companies also warned that more redundancies lie ahead, indicating the recovery may yet stutter.
Services industry firms reported strong growth in IHS Markit’s purchasing managers’ index (PMI) survey, albeit from a very low level.
The PMI rocketed from 47.1 in June to a five-year high of 56.5 in July. Anything above 50 signals expansion.
PMI data suggests that GDP rose by 8pc in June and the same again in July, according to Samuel Tombs at Pantheon Macroeconomics.
This huge surge is unprecedented in modern times but comes after lockdown cratered the economy. Mr Tombs estimates that output is still 12pc below its pre-Covid peak.
There were also signs of a sharp rise in visits to shopping areas since June, according to data firm Springboard, but numbers are still 39.4pc below where they were a year ago.
Footfall should climb further this month due to the Government’s “eat out to help out” subsidy scheme, with diners racing to enjoy up to £10 off meals from Monday to Wednesday.
At steak chain Hawksmoor, cofounder Will Beckett said there have been 15,500 bookings over the duration of the month-long discount. Andrei Lussmann, of the Lussmanns group of restaurants backed by investor Luke Johnson, said bookings for Monday to Wednesday are double the level they would be in normal times.
Meanwhile, new vehicle sales rose for the first time this year as motorists returned to car showrooms, sparking an 11.3pc jump in registrations last month compared to July 2019.
It was the first full month when dealerships were open across the whole of the UK and comes after a near-total collapse of the market during lockdown.
The Society of Motor Manufacturers and Traders said special offers had helped to boost demand as sellers rushed to offload excess stock.
But it also warned that registrations are still down 41.9pc so far this year, equal to nearly 600,000 cars.
The trade body now predicts that sales will fall 30pc in 2020, representing over £20bn of lost business.
The building trade is also making a comeback. In June 2020, UK brick sales were 76.5pc higher than in May and more than five times higher than in April following the easing of lockdown. This was still a third lower than last June, government figures show.
Noble Francis, at the Construction Products Association, said house building is likely to recover further in coming months after Chancellor Rishi Sunak slashed stamp duty.
Growth also returned in the eurozone, with a services PMI of 54.7.
Retail sales in the area climbed back to their pre-virus levels in June.
New cars being stored at the former Rockingham Motor Speedway track in Corby, Northants