UK PMIs Signal Post-Budget Bounce

Okay, so the UK's flash PMIs for December were better than expected. Manufacturing hit 51.2 (better than the expected 50.4, and up from 50.2), services were at 52.1 (again, better than the 51.5–51.6 expectation, and up from 51.3), and the composite came in at 52.1 (compared to the 51.6 expectation, up from 51.2). Manufacturing has grown for 2 months straight – the best it’s been since mid-2024. Services are also growing faster, which suggests the private sector is growing a bit faster overall, about 0.2% each month for GDP and 0.1% for the fourth quarter.

People who took the survey said output is growing faster and they're getting the most new business in over a year. Business people are feeling better now that the uncertainty after the Budget has cleared up. Demand has risen across the board, which supports the idea that the economy is stabilizing now that policies are more relaxed.

On the downside, employment has shrunk for 15 months straight. Staff costs are still a problem, and selling prices are rising again. Because of these mixed signals, the Bank of England will probably wait to see more data before cutting rates further into 2026, balancing the need to help growth against the risk of inflation.