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[UK December PMI Data Overview] ⑴ The UK December Services PMI preliminary reading was 52.1, higher than the expected 51.6 and the previous reading of 51.3; the Manufacturing PMI preliminary reading was 51.2, higher than the expected 50.4 and the previous reading of 50.2; the Composite PMI preliminary reading was 52.1, higher than the expected 51.6 and the previous reading of 51.2. ⑵ Despite the better-than-expected data, commentary noted that growth momentum was weak, job losses were worryingly widespread, and inflation in both goods and services prices rebounded. ⑶ This makes a rate cut by the Bank of England on Thursday still possible, but its wording on subsequent actions may be more cautious, remaining highly data-dependent. There is a risk of overly accommodative policy, and the market may slightly lower its dovish expectations. ⑷ Key findings showed that output growth accelerated in December, mainly driven by the strongest new business growth in 14 months. (5) Chris Williamson, chief business economist at S&P Global Market Intelligence, commented that the preliminary December PMI reading brought good news of accelerated economic growth at the end of the year, partly due to the easing of uncertainty following the budget, which boosted business confidence. (6) The PMI data suggests that GDP growth will accelerate to 0.2% in December, but the overall fourth-quarter growth signal is more moderate at 0.1%. (7) Reassuringly, business confidence did not sink as it did after last year's budget. Instead, with some of the uncertainty from the budget easing and signs of improving demand, businesses ended the year on a slightly more optimistic note. New orders are growing at their fastest pace in a year. (8) However, overall growth in output and demand remains weak, and expansion remains heavily reliant on activity in the technology and financial services sectors, while many other economic sectors are experiencing sluggish growth or contraction. (9) The worrying widespread decline in employment remains a concern, and it remains to be seen whether the increase in December orders will persuade more companies to resume hiring, especially as rising labor costs continue to be reported as one of the main concerns for businesses. (10) These higher cost pressures, in turn, are cited as the main reason for the resurgence of inflation in sales prices for goods and services. (11) Therefore, the weak growth shown in the preliminary PMI readings and the worrying employment data suggest that the likelihood of further interest rate cuts at the December Monetary Policy Committee meeting remains high. However, the path of further rate cuts in 2026 will be highly data-dependent, as policymakers are awaiting confirmation that price pressures will substantially ease within the year.