UK DATA: Very little positive in the PMI report; services sentiment hit hard
Very little positive in the UK flash PMI report with the one exception being prices changed coming in a bit lower (in spite of cost pressures increasing). Despite that, firms are already starting to increase prices to maintain margins ahead of next year's employer NIC and minimum wage increases. And they are looking to not hire replacements to reduce their headcount (but that isn't translating into large outright redundancies yet). Concerningly, services sentiment was the lowest since December 2022. We still don't think that this will be enough for a December cut - the centre of the MPC seems pretty far from that - but as we noted ahead of the data it does increase the probability of dissent from either Taylor and / or Ramsden if we get a slew of weak data ahead of the December decision (we get another labour market and inflation print as well as more updates from the DMP and Agents Survey).
Highlights from the press release:
- "Average cost burdens increased at a robust and accelerated pace in November. This was driven by the steepest rise in input prices across the service sector since July. Survey respondents mostly noted strong salary pressures, alongside rising technology costs, food prices and energy bills."
- "Prices charged inflation resumed its downward trajectory in November, despite a faster increase in overall input costs. Moreover, the latest rise in average prices charged by private sector firms was the slowest since February 2021. Service providers continued to indicate a much steeper rate of prices charged inflation than manufacturing firms, although both eased slightly since October. Many survey respondents noted that selling prices had been increased to maintain margins ahead of the rise in employer national insurance contributions from April 2025."
- "Sentiment regarding business activity expectations for the year ahead was the least upbeat since December 2022, largely due to a considerable slide in service sector confidence. Reports from service providers overwhelmingly linked weaker optimism to forthcoming increases in payroll costs, alongside perceived disincentives to expand investments and hire additional staff."
- "New order growth eased to its lowest for one year amid widespread reports of fragile business confidence."
- "Marginal reductions in private sector employment have been recorded in each of the past two months, with survey respondents often citing the non-replacement of voluntary leavers to help offset forthcoming rises in payroll costs."
- "Survey respondents typically commented on subdued customer demand. Some firms noted delayed investment decisions, as well as cutbacks to new projects in response to worsening domestic business conditions and geopolitical uncertainty."