The UK’s automotive sector registered the fastest output growth of all sectors in August as it showed signs of strong recovery from the nation’s full COVID-19 lockdown earlier this year.
Despite Society of Motor Manufacturers and Traders (SMMT) data which showed new car registrations down 5.8% the latest Lloyds Bank UK Recovery Tracker, which examines the shape and pace of the UK’s recovery from the coronavirus pandemic, reported a strong showing from the sector.
The output of UK businesses in 13 of the 14 sectors monitored by the Tracker increased in August, up from 12 sectors in July as tourism and recreation returned to growth for the first time since February.
The Lloyds Bank UK Recovery Tracker includes indices compiled from responses to IHS Markit's UK manufacturing, services and construction Purchasing Managers’ Index (PMI) survey panels, covering over 1,500 private sector companies.
It uses a PMI rating as its key KPI, with reading of above 50 signalling output is rising .
The Tracker’s “automobiles and auto parts” analysis for August delivered a reading of 77, leading the economic recovery ahead of healthcare (71).
A statement issued by Lloyds Bank said: “The UK automotive industry registered the fastest growth of all sectors as manufacturing plants increased their capacity and consumer demand rebounded.
“Healthcare output growth was driven by the restart of private health services and robust demand for pharmaceuticals, PPE and other healthcare products.
“Chemicals (62) also recorded a strong rise in production volumes.”
Despite the positive trend among these sectors the Tracker’s findings caused Lloyds to urge cautious optimism. It said: “While the vast majority of UK sectors outperformed their international counterparts in August, this should be viewed in the context of the historic lows recorded during the second quarter of 2020.
“All 14 UK sectors monitored by the Tracker underperformed against the global benchmark in April.”
Renewed lockdown risk
As the UK awaits another announcement from Prime Minister Boris Johnson tomorrow, which could bring news of the return of certain lockdown restrictions across the UK, the Lloyds Bank UK Recovery Tracker showed signs that regional lockdowns may already be taking their toll on the economic recovery.
Around 13 million people are currently subject to regional lockdown restrictions in the UK.
Car retailers across the UK have had to consider their approach towards new government measures imposed to stem a rise in the COVID-19 'R' infection rate since the first regional lockdown, in Leicester, back in June.
Such measures have imapcted the UK's rate of recovery, according to Lloyds.
In July its Tracker reported that 12 of the 14 monitored sectors had reported their output rose at a faster pace month-on-month, but that KPI had declined to just seven last month.
It said: “This indicates the momentum behind the recovery of some UK sectors is already starting to slow after a sharp rebound in output from the historic lows recorded during Q2 2020.”
Metals and mining saw the largest month-on-month decrease in August (59 vs 75 in July), after topping the rankings in July.
Beverages and food (56 v 63) and household products (58 v 64) also recorded weaker output growth than in July, suggesting that the recent expansion of domestic consumer demand following the easing of lockdown measures is starting to tail off.
Across Europe the UK was able to buck a trend of falling PMI across all sectors during August, however.
While the overall rating in Germany (54 v 55), France (52 v 57), Ireland (54 v 56), Spain (48 v 53) and Italy (50 v 52) all fell, the UK accelerated its output growth month-on-month in August (59 v 57).
The only other countries to see stronger output growth month-on-month were the United States (55 v 50), Russia (57 v 56.8) and China (55 v 54.5).
Jeavon Lolay, head of economics and market insight, Lloyds Bank Commercial Banking, said: “The headline findings of this month’s UK Recovery Tracker paint a positive picture, with more domestic businesses outperforming their international counterparts during August.
“However, despite most UK sectors being ahead of the global benchmark, the data shows the recovery of some industries is starting to slow.
Lolay added: “It will be interesting to see the picture in September when the Eat Out to Help Out scheme has ended and the impact of the ‘rule of six’ on sectors that rely on social interaction, such as tourism and recreation, is clearer.”