February data pointed to another marginal rise in UK private sector output. Higher levels of service sector activity helped offset the strong decline in manufacturing output. However, sales pipelines remained weak as total new work fell for the third consecutive month and at the fastest pace since August 2023.
Private sector companies pointed to another sharp decline in the number of employees, largely in response to high salary costs and weak demand. The latest decline was the sharpest since November 2020. Meanwhile, strong wage pressures contributed to the fastest increase in the 21-month average cost burden in February.
At 50.5 in February, the UK’s seasonally adjusted global PMI fell slightly from 50.6 in January but above the neutral 50.0 threshold for the 16th consecutive month.
Services sector growth gained some momentum in February, but the pace of GDP expansion was much weaker than the long-term survey average. Anecdotal evidence has often pointed to a lack of new work to replace completed projects and cautious spending among clients in response to public concerns about the outlook for the UK economy.
Some providers also noted that increased uncertainty in global business weighed on growth in February. Industrial output fell for the fourth consecutive month in February and the pace of decline has accelerated since the beginning of 2025. The decline in production was attributed to lower sales in both domestic and overseas markets, as well as a lack of confidence in the near-term demand outlook.
. February data pointed to a moderate decline in total new business received by private sector companies in the UK, with the pace of decline accelerating to its most intense in a year and a half. Moreover, the recent decline in new business received by service sector companies was the fastest since November 2022.
Market Reactions to UK Flash Manufacturing PMI
The impact of the disappointing PMI reading on the markets was significant. Following the announcement, the pound saw a decline against major currencies, reflecting investors‘ concerns about the health of the manufacturing sector. A weaker PMI usually indicates lower confidence among manufacturers, which could lead to lower investment levels and slower economic growth.
Currency traders reacted quickly, sending sterling lower as expectations grew that the Bank of England may need to consider more accommodative monetary policies to stimulate the economy.
This interaction is particularly noteworthy given the current economic climate, where inflationary pressures remain a concern, and any sign of weakness in key sectors could prompt discussions about lowering interest rates to support growth.
In addition to the currency market reactions, the stock market also felt the impact of weaker PMI data. Shares of manufacturers, especially those heavily dependent on domestic demand, saw declines as investors reassessed their expectations for future earnings.
Public sentiment in the stock market turned cautious, with analysts warning that prolonged weakness in the manufacturing sector could spill over into other areas of the economy. Since the manufacturing sector is often seen as an indicator of overall economic performance, the recent PMI reading has raised fears of a broader economic slowdown. Investors are now bracing for potential impacts that could affect consumer spending and investment across various industries.
As analysts look to the future, the focus will be on whether the manufacturing sector is able to stabilize or if there are further declines on the horizon. The interplay between global supply chain challenges, consumer sentiment and geopolitical factors will be crucial in shaping expectations for future PMI readings.
Expectations for the current month on the British Flash PMI
Looking ahead, analysts are adopting a cautious stance regarding the PMI outlook for the current month. While the previous month’s decline provides a clear indication of the challenges faced by the manufacturing sector, several factors will be decisive in determining whether the trend will continue. One key area to watch is the impact of global supply chain disruptions, which have been an ongoing problem for manufacturers around the world.
Ongoing challenges related to logistics, material shortages and shipping delays can significantly affect production capacities. If these issues persist, they could exacerbate the current contraction in the manufacturing sector, leading to further declines in the PMI for the coming month.
Another important factor to consider is the general economic environment in the UK, especially in relation to consumer demand. Recent consumer sentiment surveys have pointed to mixed expectations, with concerns about rising living costs and inflation weighing on spending behavior. If consumers retreat from spending, it could create a vicious circle that further affects industrial output.
The upcoming holiday season will also be pivotal, as manufacturers rely heavily on consumer spending during this period. If consumers remain reluctant to spend, it could lead to a significant drop in production levels, exacerbating the challenges the sector already faces.
Moreover, the geopolitical landscape may complicate the situation for UK manufacturers. Ongoing uncertainty related to trade agreements, Brexit fallout, and international relations can create an environment of instability affecting business confidence. Manufacturers operating in export markets may be particularly vulnerable to shifts in trade policies and tariffs, which can affect their competitiveness. Therefore, any developments in these areas will be closely monitored as they may affect PMI readings in the coming months.
