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UK DATA: PMIs show rising price pressures but falling employment and new orders

UK DATA
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Some similar themes to the EZ PMIs this morning with manufacturing disappointing, services coming in higher than expected but average prices increasing at the fastest pace for nine months, particularly in services. Prices of raw materials and fuel are being cited, but the increase of costs for businesses from the Budget is also being seen as a hugely important factor here. This may well limit the potential for more dovish dissents at the MPC meeting this week (although Dhingra is still likely to vote for a 25bp cut and we still don't rule out her being joined by Taylor and/or Ramsden if the other data this week dovishly surprises). The PMI data also backs up other survey data (e.g. DMP and REC) which point to employment falling.

  • "Average prices charged by private sector firms meanwhile increased at the steepest pace for nine months, led by a robust and accelerated rise in the service economy. Survey respondents commented on the need to alleviate pressure on margins from higher salary payments, as well as general business overheads and greater prices paid for fuel and raw materials."
  • "Business activity expectations for the year ahead moderated for the fifth successive month in December. The latest survey pointed to the lowest degree of business optimism since December 2022, largely due to an ongoing slide in service sector confidence."
  • "A combination of softer demand, rising employment costs, and squeezed margins contributed to a further reduction in private sector headcounts at the end of 2024. The latest decline in workforce numbers was the steepest since January 2021."
  • "The rate of job shedding across the private sector economy was the fastest for almost four years. Service providers recorded a particularly steep decline in employment at the end of 2024, which was mainly linked to the nonreplacement of voluntary leavers in response to rising employment costs. Some firms also noted that forthcoming increases in employers’ National Insurance contributions had encouraged cutbacks to working hours and longer-term efforts to restructure workforces."
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Some similar themes to the EZ PMIs this morning with manufacturing disappointing, services coming in higher than expected but average prices increasing at the fastest pace for nine months, particularly in services. Prices of raw materials and fuel are being cited, but the increase of costs for businesses from the Budget is also being seen as a hugely important factor here. This may well limit the potential for more dovish dissents at the MPC meeting this week (although Dhingra is still likely to vote for a 25bp cut and we still don't rule out her being joined by Taylor and/or Ramsden if the other data this week dovishly surprises). The PMI data also backs up other survey data (e.g. DMP and REC) which point to employment falling.

  • "Average prices charged by private sector firms meanwhile increased at the steepest pace for nine months, led by a robust and accelerated rise in the service economy. Survey respondents commented on the need to alleviate pressure on margins from higher salary payments, as well as general business overheads and greater prices paid for fuel and raw materials."
  • "Business activity expectations for the year ahead moderated for the fifth successive month in December. The latest survey pointed to the lowest degree of business optimism since December 2022, largely due to an ongoing slide in service sector confidence."
  • "A combination of softer demand, rising employment costs, and squeezed margins contributed to a further reduction in private sector headcounts at the end of 2024. The latest decline in workforce numbers was the steepest since January 2021."
  • "The rate of job shedding across the private sector economy was the fastest for almost four years. Service providers recorded a particularly steep decline in employment at the end of 2024, which was mainly linked to the nonreplacement of voluntary leavers in response to rising employment costs. Some firms also noted that forthcoming increases in employers’ National Insurance contributions had encouraged cutbacks to working hours and longer-term efforts to restructure workforces."