UK: Mirroring its European counterparts – NOMURA

The UK PMIs also surprised to the upside relative to our and consensus expectations. The composite PMI output index rose by 1.6pts to 53.0. The rise was squarely concentrated in the services sector, however. The manufacturing PMI output index rose by only 0.1pt, while the services PMI output index jumped by 1.8pts to 53.6, NOMURA's FX analyst report.

Output price pressures remain more benign

"The UK also saw rising upstream price pressures in August according to the PMIs. Input price indices rose in both the manufacturing and services sectors, though the increase was stronger in the manufacturing sector. However, output price pressures remain more benign; the output price index declined in the manufacturing PMI and the output price index barely changed in the services PMI. However, rising input price pressures suggest there could yet be a rise in output price pressures in the future."

"The composite PMI employment index rose on the month, albeit it remains sub-50, and has been for 11 months, suggesting job destruction – as many of the UK’s business surveys suggest. On the whole, the UK PMIs – on activity and prices, at least – tell a similar story to their European counterparts: better-than-expected activity with upstream price pressures building."

"While the lack of a rise in output price pressures should provide comfort to the Bank of England, we note that – like their input price counterparts – the indices remain above their long-run averages. We expect price momentum, particularly in the services sector, to slow in the near-term, which would support the Bank of England cutting Bank Rate by 25bp in November. Markets, meanwhile, price 7bp of cuts by November 2025 and 24bp of cuts by March 2026."