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 production. 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.
Export orders decline and inflation increases in February 2025
New export orders fell at the fastest rate since August 2023, reflecting faster rates of contraction in both the manufacturing and services sectors. The decline in new business from abroad was mostly linked to weak sales in key developed markets, especially the European Union and the United States.
Weak demand led to a lack of pressure on business capacity in February. This was highlighted by the decrease in workloads for the twenty-second consecutive month. Manufacturers saw a particularly sharp decline in unfinished works.
A combination of overcapacity for business, weak customer demand and rising payroll costs led to a marked drop in employment numbers across the private sector in February. Some companies also noted that plans to increase automation and boost productivity have resulted in the non-replacement of departing employees, especially in the service economy. The overall rate of job losses was the sharpest in more than four years.
Input cost inflation accelerated for the fourth consecutive month in February. Severe cost pressures have been mainly associated with higher salary payments and the influence of suppliers seeking to pass on upcoming increases in the National Insurance for employers.
Manufacturers also pointed to higher raw material costs and energy bills in February, with overall purchase price inflation hitting a 25-month high.
The latest survey also pointed to strong price increases charged by both manufacturers and service providers. Commodity producers pointed to the strongest rate of factory gate price inflation since April 2023.
Meanwhile, the outlook for business activity for next year rose from a 25-month low in January. This reflected an improvement in business optimism among both manufacturers and service providers.
How does the spot manufacturing PMI affect the UK economy in general?
Purchasing Managers’ Index (PMI) affects the UK economy in many ways:
Growth forecast: PMI is a leading indicator that reflects the health of the manufacturing sector. A reading above 50 indicates growth, while a reading below 50 indicates contraction, helping to predict economic trends.
Investor confidence: Good PMI data boosts investor confidence, which can lead to increased investments in stocks and bonds, thereby supporting economic growth.
Impact on monetary policies: The Bank of England uses PMI data to assess the economic situation. Strong readings may push him to raise interest rates, while weak readings may lead to lower them.
Employment Trends: PMI changes indicate new employment trends. Manufacturing growth could lead to increased employment, while contraction could lead to layoffs.
Impact on prices: PMI also affects price pressures. If there is strong growth, inflation may rise, affecting economic decisions.
Impact on trade: PMI can reflect domestic and international demand, affecting the balance of trade. Strong data may point to increased exports, while weaker demand could lead to a decline.
Changes in the business environment: external factors such as economic crises or political changes can influence readings.
Regional changes: Differences in the performance of different sectors within the country can affect the PMI reading.
Data for other indicators: Comparisons with other economic indicators, such as GDP and employment, can enhance understanding of readings.
Inventory levels: Inventory changes reflect a company’s strategy in dealing with demand. Increased inventory may indicate weak demand, while a decrease may indicate strong activity.
Future signals: Focusing on current trends can help predict the future performance of the economy.
In general, PMI is an important tool for analyzing the economic situation in the UK and guiding investment policies and decisions.
