Some British Industries to Gain Big Despite PMI Numbers Struggling through Coronavirus Turmoil

  • Apr 07, 2020 BST
  • Team Kalkine
Some British Industries to Gain Big Despite PMI Numbers Struggling through Coronavirus Turmoil

The effect of the coronavirus pandemic is clearly visible in the UK Composite PMI output index data released by the IHS markit company for the month of March. The press release by the company has stated that the rate of decline recorded this month is the fastest than ever been recorded by the company since the beginning of the index series in January 1998. The index value for the month stood at 36.00 against the February value of 53.0 registering a 17.0 points drop during March 2020. The biggest contributor in this drop, however, was the UK Services PMI Business Activity Index which stood at 34.5 against a February index reading of 53.2, registering a drop of 18.7 points and the lowest since the survey began in July 1996. These number clearly show that the British economy is heading into deep recession. This is despite the fact that a few of the critical sectors of the UK economy have been witnessing an upheaval in business activity in the past one month since the pandemic first surfaced in the country

Till last month, both the manufacturing activity index and the services activity index were in the expansion zone marking a new phase of growth after Brexit. The growth figures were also record breaking signifying that the governments’ policies in the country are being well received and businesses are willing to go out and invest more to bring back growth to the economy. The advent of the coronavirus pandemic however, changed all that and in a fortnight pulled the country down into a recession. The services sector of the country obviously seems to struggle the most. The lockdown conditions in the country meant that not many people in the private sector could move out of their homes and very few having the opportunity to work from home. The hardest hit of them probably are the professionals and other self employed people, who constitute a very large portion of the working class population of the country. Also, sufferers are the temporary workers of small and medium businesses in the country who earn daily and weekly wages and are not counted as permanent employees; they are falling short of basic necessities and are in severe need of assistance. However, the services sector has been witnessing the resurgence of all the sectors and had single handedly pulled the economy into an expansionary mode while the manufacturing activity was still near the neutral zone.

The manufacturing sector in the United Kingdom has been battered very badly. The sector is suffering on multiple fronts. Even before the lockdown was in place, the shortage of component parts has halted production with several automobile and heavy engineering companies’ operations coming to a standstill. When the lock down happened, the manufacturing activity in the country has come to a temporary halt with companies not sure about when will they be able to resume production. The activity levels in this sector lag behind the services sector, but could still see a slow recovery.

However, despite all the downturn and depressive business conditions being depicted by this report, there are some sectors which are creating a buzz on business fronts. The online retailing industry has been a stellar in terms of its recent business activity levels. The industry which carries out most of its business over the internet does not require as much workforce as compared to the other manufacturing or services industries. This industry has in fact hired more people in the past month since the pandemic broke out. Major companies belonging to the industry have pooled together their resources and have even been working outside of their normal working hours to fulfil the enhanced customer demands. After the imposition of lockdown in the country, most of the necessary merchandise started to be traded over the digital medium as it was not possible for people to visit stores to buy their provisions. In the next few months until the lockdown is in effect that activity levels in this industry is expected to continue to expand.

The other industry which is seeing a heightened business activity is the pharmaceutical and healthcare industry. This industry is currently at the forefront of the fight against the pandemic. Several of the large and small companies on the industry are engaged in research to find cure for the virus infection and also to develop vaccine to protect the masses from contacting the disease again. Other than that, currently there is a high demand for protective gears and testing kits for which the companies are working overtime to fulfil all the orders. Several national governments and international health agencies have pledged billions of dollars to aid in development of medicines and vaccines along with the procurement of protective gears and testing kits. It is imperative that activity levels in this industry is going to expand in the coming months with more number of qualified people getting engaged which is expected to increase the number of workers in this industry for at least the short term.

The third industry in the United Kingdom which could see an upheaval in business activity in the coming months is the banking industry. The Bank of England and the government have announced a series of measures to help the British industries in this hour of crisis. These measures include several cash injection schemes and loan guarantee schemes. It is imperative that these schemes reach the intended beneficiaries as early as possible if they have to be protected from the onslaught of the pandemic. The Chancellor of the Exchequer and the bank of England have urged the banks to step up and take immediate steps so that the stimulus programmes are implemented at the earliest. This will certainly see an increase in activity levels in the banking industry in the next couple of months.

The UK Composite PMI output index data does show a lower activity levels in the British economy for the month of March but as we have seen above there are several key sectors that have seen an increase in business activity levels and are expected to continue to grow in the coming weeks. These are the major industries that could hold the key to the revival process of the UK economy as and when it happens. The situation that is being experienced in the United Kingdom is also being witnessed in other parts of the world. Central banks of several countries and multinational financial institutions have taken decisive steps to support businesses who are currently reeling under the effects of the pandemic. It can be reasonable expected that the UK Composite PMI output index numbers will also witness a sharp rise when current period of turmoil is over.

Also Read: Global Equities Shine on Hopes of Slowing Coronavirus Cases Worldwide but Oil Drops on Oversupply Fears

The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. The above article is NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) under discussion. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site.

With Bank of England reducing the interest rates to a historic low level, the spotlight is back on diverse investment opportunities. 

Amidst this, are you getting worried about these falling interest rates and wondering where to put your money?

Well! Team Kalkine has a solution for you. You still can earn a relatively stable income by putting money in the dividend-paying stocks.

We think it is the perfect time when you should start accumulating selective dividend stocks to beat the low-interest rates, while we provide a tailored offering in view of valuable stock opportunities and any dividend cut backs to be considered amid scenarios including a prolonged market meltdown.

To know more about these dividend stocks, click here

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK