Businesses grew at their fastest pace in five years last month as lockdown restrictions eased and customers surged back to spend money.
Car sales jumped as delayed purchases of new vehicles were able to go ahead, more bricks were bought as construction sites ramped up work, and visits to shops picked up, while restaurants report soaring bookings into August.
It boosts hopes of a rapid, V-shaped recovery for the economy.
However companies also warned more redundancies are ahead, indicating the rebound may stutter as jobs are lost.
Services industry firms, which dominate the UK economy, reported strong growth in IHS Markit’s purchasing managers’ index (PMI) survey, albeit from a very low level.
The PMI surged from 47.1 in June to a five-year high of 56.5 in July, breaking through the 50-level which divides growth from contraction.
It means GDP increased by 8pc in June and the same again in July, estimates Samuel Tombs at Pantheon Macroeconomics.
“That would represent a significant improvement from May’s 1.8pc increase, though GDP still would be a hefty 12pc below its pre-Covid peak,” he said. “GDP growth, however, likely will fade in the autumn, as job losses accumulate and households maintain a high saving rate.”
That failure to get back to old levels is shown starkly in the retail sector.
Visits to high streets, shopping centres and retail parks improved from June to July but were still significantly down compared to last year, data firm Springboard said.
Similarly, Ipsos said shopper numbers were down by 53pc year-on-year, excluding food stores, but the average weekly numbers were up 12.7pc compared to June.
The ‘eat out to help out’ scheme should boost numbers in August.
Will Beckett, co-founder of steak chain Hawksmoor, said: “Demand has been incredible, we could probably have sold the table three times over. We’ve got around 15,500 bookings for the 13 days [of the scheme] across August.”
Anrei Lussman, of the Lussmanns group of restaurants backed by investor Luke Johnson, said bookings for Monday to Wednesday are double the level they would be during normal times.
First rise in new car sales
Motorists returning to car showrooms after lockdown ended drove the first rise in sales of new vehicles this year, with an 11.3pc rise in registrations last month.
Almost 175,000 new cars were purchased in July following a near-total collapse in the market through the lockdown.
It was the first full month of dealerships being open across the UK as a whole.
The Society of Motor Manufacturers and Traders (SMMT) said pent-up demand and special offers led to a “reprieve” for the sector.
However, it warned that registrations for the year to date were still down by 41.9pc, or almost 600,000 cars. The trade body now predicts that 2020 will result in a 30pc fall in sales on the previous year, representing more than £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. Despite the uptick, sales are one-third lower than June last year.
Noble Francis, at the Construction Products Association, said house building “is likely to rise further [in the] near-term” due to the the stamp duty holiday in England and Northern Ireland and their equivalents in Scotland and Wales, plus the extension for the completion date for homes under the current unconstrained version of Help to Buy.
Meanwhile growth also returned in the eurozone with a services PMI of 54.7.
Retail sales in the currency area returned to their pre-virus levels in June, in a perfect ‘V-shaped’ recovery.