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Business optimism and economic activity soar over road map to reopening

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The UK economy showed strong signs of growth in March, hitting a seven-month high, as the optimism over the vaccine rollout saw businesses increase their spending, according to new data.

The closely-followed IHS Markit/CIPS Flash UK Composite PMI report came in at 56.6, with anything below 50 seen as a market in contraction.

This improved from February’s contraction of 49.6.

Data collected at the start of the month – but crucially after the Government’s Budget and latest official projections for recovery – showed businesses reported a rise in new orders for the first time since September last year.

Bosses said there was stronger consumer confidence and a surge in demand for residential property services as the stamp duty holiday was extended to the summer.

The encouraging readings on future expectations, job creation and new order inflows all point to robust economic growth in the second quarter, especially if virus restrictions are lifted further

The service sector also saw stronger growth compared to manufacturing production growth for the first time since the pandemic started, as businesses prepared for lockdown restrictions easing.

Services saw higher levels too as customers made bookings in preparation for the lifting of Covid-19 rules, with a knock-on effect to manufacturers, who reported an uplift in advance orders from the hospitality and retail sectors.

Exports remain subdued though, with total new orders from abroad falling for the third month in a row.

Earlier this month the Office for National Statistics revealed a slump in EU exports since the end of the Brexit transition period due, in part, to the additional paperwork involved.

Demand for unfinished work from earlier in the lockdown was also increased, leading to some manufacturers reporting capacity constraints due to supply chain difficulties.

The increase in orders and demand ahead of lockdown easing also led to an increase in private sector employment in March, respondents said – marking the first upturn since February 2020.

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