Inflationary Pressures From Flash Release Confirmed In Feb Final PMI

The UK services PMI was revised -0.5 points lower vs the flash release at 53.8 (vs 54.3 flash). However, the index remains above levels seen in H2 2023 and has printed above 50 for the last 4 months.

• The key message appears similar to the flash release though: Labour costs continue to put upward pressure on prices, much like in the Eurozone.
• BoE-dated OIS continue to shows ~60bp of ’24 cuts, while Gilts also saw a limited reaction.

Key notes from the release:

• "Higher levels of business activity were supported by a solid increase in new order volumes during February".
• "Some firms also cited the prospect of lower interest rates as a factor driving a turnaround in customer demand".
• "Strong cost pressures persisted across the service economy. Overall input price inflation accelerated to its highest since September 2023, primarily driven by higher wage bills".
• "A number of firms also reported increased costs due to shipping surcharges".
• "Anecdotal evidence suggested that resilient customer demand had allowed firms to pass on higher business expenses, with many citing upward pressures from rising wages".