• Prior 50.9
  • Manufacturing PMI 46.4 vs 47.5 expected
  • Prior 47.2
  • Composite PMI 51.7 vs 50.9 expected
  • Prior 50.7

This is a contrast to the euro area data from earlier, as the UK economy is seen picking up further towards the end of the year. Overall activity is bolstered by the services sector once again as manufacturing activity remains in contraction territory for now. On the inflation front, input prices were seen rising to their highest since August while output charges are also seen increasing with little sign of a slowdown since the summer. S&P Global notes that:

“The UK economy continues to dodge recession, with growth picking up some momentum at the end of the year to suggest that GDP stagnated over the fourth quarter as a whole. While employment meanwhile fell for a fourth month, the decline was only marginal and not indicative of any material rise in unemployment.

“This is, however, a dual-speed economy, with manufacturing contracting sharply while services regained some poise, the latter growing faster in December thanks in part to financial services activity being buoyed by hopes of lower interest rates in 2024.

“This divergence is also reflected in inflation pressures, with falling prices again evident in the goods producing sector while service providers report persistent elevated inflationary pressures, often linked to wage growth. The resulting signal is one of inflation remaining stubbornly above 3% in the coming months.

“The service sector’s resilience and sticky inflation picture will add to speculation that it’s too early for the Bank of England to be talking about cutting interest rates, and will add fuel to some policymakers’ calls for further rate hikes. However, the fear is that the tentative nature of growth in December, and the impetus from looser financial conditions, means that fears of further policy tightening could tip the economy back into decline.”