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2026-02-20 17:31:34
[UK PMI Hits New High for the Year, Employment Market Concerns Fuel Interest Rate Cut Expectations] ⑴ UK business activity continued its rebound from the beginning of the year, with the preliminary composite Purchasing Managers' Index (PMI) rising to 53.9 in February, the highest level since April 2024, exceeding the expected 53.3. This data indicates a strong start to 2026 for the UK economy. ⑵ Manufacturing has become a highlight of this recovery. The manufacturing PMI rose to 52.0, a new high in 18 months, exceeding the expected 51.5. Export orders performed particularly well, with new business growth from overseas reaching its fastest pace in four and a half years, indicating a recovery in external demand. ⑶ The services PMI slightly decreased to 53.9, still within a robust expansion range. However, the employment situation within the services sector is worrying, with significant layoffs or hiring freezes. Some businesses attribute this to the Labour government's fiscal policy of increasing employers' social security contributions, which is affecting employment decisions in the services sector. ⑷ The weakness in the employment market contrasts with the growth. S&P Global's chief business economist points out that despite encouraging growth data, continued weakness in the labor market will fuel calls for further interest rate cuts. Investors widely expect the Bank of England to resume rate cuts in March to address the combination of cooling employment and declining inflation. (5) Price signals are moderate and manageable. Business sales prices rose at their fastest pace since April last year, but cost burden growth slowed to its lowest level in three months. This combination provides the central bank with more policy room, and the trade-off between growth and inflation has not yet hindered rate cuts. (6) Overall, the UK economy is operating at a quarterly growth rate of about 0.3%, a significant improvement from 0.1% at the end of last year. Some businesses are choosing to replace personnel expansion with technology investment; this structural adjustment may have a lasting impact on the pace of the labor market recovery.
