UK Private Sector Economy Regains Momentum in October -PMI
The UK private sector economy regained some momentum in October, with stronger output growth underpinned by another modest upturn in the service economy and the first expansion of manufacturing production for 12 months.
In its purchasing manager index, S&P reported that new business volumes also increased in October, which contributed to the least marked rate of private sector job shedding since May.
At the same time, input price pressures moderated to the lowest since November 2024. This led to a slower rate of output charge inflation, driven by a weaker uplift in service sector prices.
Adjusted for seasonal factors, the headline S&P Global Flash UK PMI® Composite Output Index registered 51.1 in October, up from 50.1 in September and above the 50.0 no-change value for the sixth consecutive month.
According to S&P Global, the latest reading was weaker than the long-run series average (53.5) and signalled only a marginal pace of expansion.
UK output growth remained relatively sluggish in the service economy, with the latest expansion the second-weakest since May.
A number of firms cited subdued consumer sentiment, as well as the impact of deferred corporate decision-making ahead of the upcoming November Budget, S&P said.
In the same month, UK Manufacturers recorded the fastest upturn in production since September 2024, although the rate of growth was only marginal overall.
UK Higher levels of output were linked to restocking efforts and, in some cases, a tentative turnaround in domestic demand.
S&P revealed that survey respondents in the automotive supply chain again commented on challenging business conditions following the JLR cyberattack, despite a boost from the phased restart of manufacturing operations in October.
PMI noted that total new business across the UK private sector returned to growth in October, led by improving sales pipelines in the service economy.
Although only modest, the upturn in overall new orders was the second-fastest since October 2024. Meanwhile, falling export sales persisted, however, largely reflecting another steep reduction in the manufacturing sector.
UK Goods producers noted weak global demand and cautious investment sentiment. Manufacturing firms cited lower export sales due to US tariffs, including an indirect impact linked to spending cutbacks among customers in Europe and Asia.
October data indicated that private sector job losses moderated to the least marked since May. This reflected slower reductions in workforce numbers in both the manufacturing and service sectors.
Sketchy evidence suggested that elevated salary pressures and excess business capacity had resulted in redundancies and the non-replacement of voluntary leavers.
The PMI report stated that average cost burdens increased sharply in October, but the overall rate of inflation eased for the second month running to its slowest since November 2024.
“Service providers recorded a much faster increase in input prices than manufacturers. There were reports that softer raw material price inflation, alongside sterling exchange rate appreciation against the US dollar, had helped to moderate overall cost pressures.
“Higher food prices, utility bills and salary payments were nonetheless widely reported in October. Lower overall input cost inflation and efforts to stimulate sales through competitive pricing contributed to a slower rise in average output charges across the private sector economy in October.
“Moreover, the rate of output price inflation was the weakest since June. Business activity expectations for the year ahead meanwhile improved during the latest survey period and were the second-highest since October 2024.
“Service providers generally attributed rising business optimism to tentative signs of a turnaround in market conditions, alongside planned new product launches and marketing initiatives.
“Manufacturers also cited positive sentiment linked to their long-term business investment strategies, as well as plans to secure export sales in new overseas markets.
“Many private sector firms still commented on worries about the domestic economic outlook and elevated political uncertainty”.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence: “October’s flash UK PMI survey brings hope that September was a low point for the economy from which business conditions are starting to improve.
“Output has picked up, with a particularly welcome return to growth for manufacturing for the first time in over a year accompanied by an upturn in demand for services, notably among consumers.
“Business confidence has also brightened slightly, job losses have moderated, and inflationary pressures are coming back to levels consistent with the Bank of England’s 2% target.
“However, even with a helping hand from restarted production at JLR, the overall pace of growth signalled by the PMI remains consistent with only sluggish GDP growth of around 0.1%.
“And, while easing, jobs continue to be cut amid a backdrop of business confidence that remains subdued by historical standards. Goods exports also continue to fall at a worryingly steep rate, in part due to the global trade disruptions caused by US tariff policy.
“Companies are clearly treading cautiously in terms of spending, investment and hiring ahead of the upcoming Budget, the outcome of which has the potential to once again sway the business mood in the months ahead.” Zenith Bank Price Target Sets at N81 after Q3 Earnings
