- Prior 54.3
- Manufacturing PMI 47.1 vs 47.5 expected
- Prior 47.0
- Composite PMI 53.3 vs 52.9 expected
- Prior 52.9
This should allay any recession fears about the UK economy to start the new year at least. Demand conditions continue to show an improvement but inflationary pressures remain elevated on the month. The rate of input price inflation in particular was the highest since August last year. And that’s not much of a welcome development for the BOE. S&P Global notes that:
“UK economic growth has accelerated in February, with
the early PMI survey data pointing to the largest rise in
business activity for nine months. This is by no means a
one-off improvement, as faster growth has now been
recorded for four straight months after a brief spell of
decline late last year.
“The survey data point to the economy growing at a
quarterly rate of 0.2-3% in the first quarter of 2024, allaying
fears that last year’s downturn will have spilled over into
2024 and suggesting that the UK’s ‘recession’ is already
over.
“It’s particularly encouraging to see that the upturn in
growth has been accompanied by a surge in optimism
about year-ahead prospects to the highest for two years,
in turn encouraging a second month of increased
employment.
“However, there are a number of areas of concern. First,
the upturn is being driven to a large extent by resurgent
demand for financial services, in turn predicated on hopes
of an imminent pivot to rate cutting by the Bank of England.
In contrast, manufacturing remains mired in contraction
and consumer-facing service providers are reporting
falling activity amid the ongoing cost of living crisis.
“Second, February saw the highest degree of supply chain
delays for over one and a half years, linked to Red Sea
shipping disruptions. The resulting increased cost of
shipping contributed to the largest monthly rise in selling
prices for goods seen over the past nine months.
“Service sector inflation also ticked higher, remaining
stubbornly elevated thanks to higher wage costs and the
pass-through of some higher goods prices. The survey
data signal consumer price inflation running around the 4%
level in the coming months – double the Bank of England’s
target.
“With growth accelerating and prices on the rise again,
February’s data mean policymakers are increasingly likely
to err on the side of caution when considering the
appropriateness of cutting interest rates.”