Lloyds Tracker May 2021

Output growth in the tourism and transport sectors has pushed the UK’s economic recovery into full swing, according to the latest Lloyds Bank UK Recovery Tracker.

11 out of 14 UK sectors reported faster output growth in May 2021, up from nine in April, reflecting the further easing of coronavirus restrictions.

Tourism and recreation reported the sharpest rise in output growth, up from 51.9 in April to 62.4 in May, followed by transport (up from 53.5 to 63.2).

A reading above 50 suggests output is expanding.

While every sector of the UK economy reported an expansion of activity in May, healthcare growth slowed most markedly month-on-month (down to 52.5 from 58.5).

Some pharmaceutical businesses commented on a slowdown in client spending after the surge in order volumes earlier in the pandemic.

All sectors also reported an increase in job creation during May, with tourism and recreation businesses increasing employment levels for the first time since January 2020.

It is the first time since April 2015 that all 14 sectors monitored by the Lloyds Bank tracker have reported employment growth.

Manufacturers reported the strongest rate of job creation, with firms increasing their workforces to meet rising international demand for goods.

While output and job creation continued to improve in May, rising inflation indicated business conditions may be less benign in the coming months.

Every sector monitored by the tracker experienced a sharp rise in input costs during May, with the rate of inflation for manufacturers hitting a 29-year high.

UK businesses increased their prices at the fastest rate since 1999 – posing challenges for the competitiveness of UK goods and services.

However, the Lloyds Banks tracker also found early signs in May of an easing of supply chain disruption – a key driver of input cost inflation.

The proportion of UK manufacturers citing shipping delays fell significantly month-on-month, from 23% in April to 16%, and reports of congestion at ports dropped from 37% to 24% in May.

Jeavon Lolay, Head of Economics and Market Insight, Lloyds Bank Commercial Banking, said: “When we look at the pace of growth, sectors that have been acutely affected by COVID-19 restrictions are now outpacing sectors that have been able to operate more freely during lockdown.

“Whether the four-week delay to further easing of restrictions will impact this trend is unclear.

“But while the delay is understandably disappointing for many businesses, there’s no denying that the economy is now on a much sounder footing."

Key takeaways:

  • All 14 sectors of the UK economy reported job creation in May for the first time since April 2015
  • Inflation remains a key concern for businesses moving forward, with UK prices increasing at the fastest rate since 1999.
  • If you’re thinking about how to grow your business in response to rising demand, head over to the UMi platform: https://www.weareumi.co.uk/webapp/ 
Richard Dawson
Article by Richard Dawson
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