UK March flash services PMI 53.4 vs 53.8 expected

• Prior 53.8
• Manufacturing PMI 49.9 vs 47.8 expected
• Prior 47.5
• Composite PMI 52.9 vs 53.1 expected
• Prior 53.0

The services print was slightly softer but a stronger manufacturing print is a welcome development, contrasting with what is taking place in the euro area at least. Overall, it points to a slight expansion in the UK economy to wrap things up in Q1. And that allows for added breathing room for the BOE to stick to the August timeline to begin cutting rates. But inflation remains a bit stubborn for now, so we’ll see how that changes in the months ahead. S&P Global notes that:

“Further signs of the UK economy having pulled out of last
year’s brief recession are provided by the provisional PMI
data for March. A further robust expansion of business
activity ended the economy’s best quarter since the
second quarter of last year. The survey data are indicative
of first quarter GDP rising 0.25% to thereby signal a
reassuringly solid rebound from the technical recession
seen in the second half of 2023.

“It is also encouraging to see a more broad-based
expansion, with a sustained increase in service sector
activity accompanied in March by signs of a tentative
return to growth for manufacturing output. Business
expectations for the year ahead also remain reassuringly
lofty by recent standards.

“However, while recession worries have abated, inflation
remains a concern. Stubbornly sticky service sector
inflation has persisted into March, exacerbated by
renewed inflation in the manufacturing sector. While the
headline rate of inflation looks likely to cool in the months
ahead, March’s PMI warns of elevated underlying price
pressures which will likely add to calls for restraint in any
pivot to lower interest rates until there are firm signs of
lower wage growth.”

This article was written by Justin Low at www.forexlive.com.