UK February flash services PMI 51.1 vs 50.8 expected

• Services PMI 51.1 vs 50.8 expected vs. 50.8 prior
• Manufacturing PMI 46.4 vs 48.4 expected vs. 48.3 prior
• Composite PMI 50.5 vs 50.5 expected and 50.6 prior.

Key findings:

• Flash UK PMI Composite Output Index: 50.5 (Jan: 50.6). 2-month low.
• Flash UK Services PMI Business Activity Index: 51.1 (Jan: 50.8). 2-month high.
• Flash UK Manufacturing Output Index: 47.4 (Jan: 49.2). 2-month low.
• Flash UK Manufacturing PMI: 46.4 (Jan: 48.3). 14- month low

Comment:

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

“Early PMI survey data for February indicate that business activity remained largely stalled for a fourth successive month, with job losses mounting amid falling sales and rising costs.

“The lack of growth alongside rising price pressures points to a stagflationary environment which will present a growing dilemma for the Bank of England.

“While marginal output growth was eked out in February, order books deteriorated at a rate not seen since August 2023 to hint at likely cuts to business activity in the coming months unless demand revives.

“Firms' costs are meanwhile rising at a rate not witnessed since May 2023, the rate of inflation having now accelerated for four straight months, putting further upward pressure on selling prices for both goods and services. The survey data point to a further rise in inflation beyond the latest uptick to 3%.

“A key factor behind the upturn in inflationary pressures is the growing number of firms reporting the need to raise prices in order to help offset the impending rise in staff costs associated with the National insurance hike and uplift to the minimum wage announced in the autumn Budget.

“However, companies also reported that the Budget changes also played a major role in driving intensifying job cuts. Employment fell sharply again in February, dropping at a rate not seen since the global financial crisis if pandemic months are excluded. One in three companies reporting lower staffing levels directly linked the reduction to policies announced in last October's Budget.”