• 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.”