London Daily

Focus on the big picture.
Saturday, Aug 22, 2026

Interest rates: 'Green light' for pre-Christmas hike as growth holds up despite disruptions

Interest rates: 'Green light' for pre-Christmas hike as growth holds up despite disruptions

A closely-watched survey showed another month of record price pressures and sharply rising customer demand - but suggested the manufacturing sector was still beset by shortages and factory shutdowns.

Strong business growth and record price pressures this month should give the "green light" for a pre-Christmas interest rate hike, according to a closely-watched survey.

November's purchasing managers' index (PMI) showed growth slipping very slightly from the month before but still pointing to an end-of-year pick up for the economy after a third quarter slowdown, despite continued supply chain disruption.

There was also a ninth month in a row of job gains - though the pace slackened off to its slowest pace since the spring, according to the poll.

The Bank of England held off on raising interest rates earlier this month, despite inflation pressures, partly because it wanted to wait for a clearer picture to emerge of how employment would be affected by the end of the furlough scheme in September.

Rate setters will hold their next meeting nine days before Christmas.

Chris Williamson, chief business economist at IHS Markit, which compiled the survey, said: "A combination of sustained buoyant business growth, further job market gains and record inflationary pressures gives a green light for interest rates to rise in December."

The PMI poll showed cost burdens again increasing at their highest pace since the survey began more than two decades ago - due to higher wages as well as fuel, energy, and raw materials prices.

Customer demand also continued to rise sharply, despite these higher costs being passed through to them by companies, the figures showed.

The cross-sector "composite" PMI reading for the month of 57.7 - where the 50-level separates growth from contraction - was slightly down from 57.8 in October.

Bank of England rate-setters hold their next meeting on 16 December


However, that masked a continuing gap between the strong pace of growth in the dominant services sector - which represents four-fifths of UK economic output - and manufacturing firms that continue to be dogged by supply chain problems.

Services - a sector that takes in pub, hotels and restaurants as well as law firms and accountants - saw a further boost as a result of the rolling back of pandemic restrictions.

However, there were some signs of profit margins being squeezed as customers showed "greater resistance" to costs being passed on in the form of higher prices.

Manufacturing growth picked up, but remained hamstrung by shortages of staff as well as materials - with a lack of critical components in some cases leading to production stoppages.

Meanwhile, export sales fell slightly, with long lead times and Brexit trade friction holding back trade with the EU, according to the survey.

Mr Williamson said: "Encouragingly, an acceleration in growth of new business hints that December should bring a strong end to the year, meaning the fourth quarter should see a welcome pick up in GDP growth after the slowdown seen in the third quarter.

"The relatively poor performance of manufacturing is likely to remain a concern for some time, however, as is the potential to see tighter growth-inhibiting COVID-19 restrictions applied amid high COVID-19 case numbers both at home and now also in continental Europe.

"The latest survey results will none the less likely shorten the odds of an interest rate hike at the Bank of England's December meeting."

Bethany Beckett, UK economist at Capital Economics, said: "The economy held up fairly well despite continued supply disruptions and shortages.

"Meanwhile, signs that price pressures continued to grow suggests that a hike to Bank rate in December still looks like the most likely outcome."

Newsletter

Related Articles

0:00
0:00
Close
Petrol Bombs Set Luxury Cars Alight Outside Birmingham Wedding as Police Hunt Three Men
Bitcoin Surges Toward $80,000 as Short Squeeze and ETF Inflows Ignite Crypto Rally
Prince Harry and Co-Claimants Ordered to Pay £9.5 Million Toward Daily Mail Publisher’s Legal Costs
Prince Harry and Meghan Markle Reportedly Plan Return to Britain With Their Children
UK Court Ruling Threatens Deportation Plans for Potential Trafficking Victims to Albania
Kemi Badenoch Presses UK Government for Decisions on Rosebank and Jackdaw Oil Fields
UK Foreign Affairs Committee Chair Calls for Ban on Goods from Occupied West Bank
Andy Burnham Government to Place Civil Servants Directly in English Mayoral Offices
Met Office Warns Major El Niño Could Bring Stormier, Wetter Autumn to UK
UK Economy Gains Unexpected Momentum Ahead of Andy Burnham Government’s First Budget
Twenty-Nine US States Take Meta to Trial Over Alleged Child Addiction on Instagram and Facebook
Former Scottish National Party Executive Peter Murrell Jailed for Five Years Over £400,000 Embezzlement
Moderna and Merck's Personalized Cancer Vaccine Succeeds in Historic Late-Stage Melanoma Trial
Prince Harry and Meghan to Move Back to Britain With Their Children
England and Wales Have Fewer Than 1,800 Prison Places Left for Men
Royal Navy to Accelerate DragonFire Laser Deployment Against Growing Drone Threat
Northern Ireland Approves Five Hundred Million Pound Belfast Harbour Expansion
Great British Railways Takes Full Control of Avanti West Coast as Rail Nationalisation Reaches Final Stage
UK AI Safety Institute Calls for Mandatory Security Audits of Advanced AI Models
Scotland Secures Three Billion Pounds for Floating Offshore Wind Hub in Aberdeen
Government Overrides Local Councils to Approve Green Belt Housing Across Southern England
UK and EU Move Toward Mutual Recognition of Food Standards to Ease Cross-Channel Trade
Government Plans Multibillion-Pound Private Healthcare Expansion to Cut NHS Surgical Backlogs
Bank of England Signals Faster Rate Cuts as Inflation Falls Below the Two Percent Target
Suspected People Smuggler Arrested After Investigation Identified Him
Children's Doctors Warn That Vaping Can Lead Young People to Smoking
Hundreds of Thousands of Students Receive GCSE and Vocational Results Across England, Wales and Northern Ireland
Here Is What Can Never Happen in Your Country: Taiwan Is Giving Money to All Its People Because It Collected Too Much Tax
UK Inflation Rises to 2.9% as Energy Bills Jump
UK Issues New Conduct Guide for Asylum Seekers on Consent and Respect
Moderna Shares Surge After Positive Personalized Skin Cancer Trial Results
UK Markets Watch US National Debt Surpass Forty Trillion Dollars
UK Broadcasters Urge Government to Invest in Digital Participation and Broadband
CVC Capital Partners and Standard Life Launch Two Billion Pound Pension Risk Transfer Venture
UK Private Sector Productivity Growth Accelerates in Second Quarter
UK Foreign Secretary Ed Miliband Condemns Israeli E1 Settlement Tender
UK Watchdog Investigates Trainline, Virgin Atlantic and RED Driving School Over Hidden Fees
Prince Harry and Meghan Markle Plan Move to Private Home Outside London
UK Retail Sentiment Improves as Summer Spending Boosts Consumer Confidence
UK Aid Cuts Draw Warnings From Charities Over Humanitarian Consequences
UK Financial Conduct Authority Issues Guidance for Motor Finance Redress Scheme
UK Met Office Launches Aviation Programme to Reduce Climate Impact of Persistent Contrails
Former UK Civil Service Chief Received Record 500,000 Pound Severance Payment
West Midlands to Bring Bus Network Under Public Franchising Model
UK Government Drops Plan to Relax Affordable Housing Requirements After Backlash
UK Reaffirms Military Support for Ukraine Despite Russian Hybrid Warfare Threats
UK Technology Sector Expands Nearly 8 Percent as Digital Industry Outpaces Wider Economy
UK Drought Threatens Harvests Across England and Wales as Food Inflation Risks Persist
UK Government Pledges 442 Million Pounds to End Rough Sleeping by Christmas
UK Government Signals Willingness to Reconsider Digital Services Tax Amid US Tariff Threats
×