London Daily

Focus on the big picture.
Saturday, Feb 22, 2025

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
Good News: Senate Confirms Kash Patel as FBI Director
Officials from the U.S. and Hungary Engage in Talks on Economic Collaboration and Sanctions Strategy
James Bond Franchise Transitions to Amazon MGM Studios
Technology Giants Ramp Up Lobbying Initiatives Against Strict EU Regulations
Alibaba Exceeds Quarterly Projections Fueled by Growth in Cloud and AI
Tequila Sector Faces Surplus Crisis as Agave Prices Dive Sharply
Residents of Flintshire Mobile Home Park Grapple with Maintenance Issues and Uncertain Future
Ronan Keating Criticizes Irish Justice System Following Fatal Crash Involving His Brother
Gordon Ramsay's Lucky Cat Restaurant Faces Unprecedented Theft
Israeli Family Mourns Loss of Peace Advocate Oded Lifschitz as Body Returned from Gaza
Former UK Defense Chief Calls for Enhanced European Support for Ukraine
Pope Francis Admitted to Hospital in Rome Amid Rising Succession Speculation
Senate Republican Leader Mitch McConnell, at the age of 83, Declares His Retirement.
Whistleblower Reveals Whitehall’s Focus on Kabul Animal Airlift Amid Crisis
Politicians Who Deliberately Lie Could Face Removal from Office in Wales
Scottish Labour Faces Challenges Ahead of 2026 Holyrood Elections
Leftwing Activists Less Likely to Work with Political Rivals, Study Finds
Boris Johnson to Host 'An Evening with Boris Johnson' at Edinburgh's Usher Hall
Planned Change in British Citizenship Rules Faces First Legal Challenge
Northumberland Postal Worker Sentenced for Sexual Assaults During Deliveries
British Journalist Missing in Brazil for 11 Days
Tesco Fixes Website Glitch That Disrupted Online Grocery Orders
Amnesty International Critiques UK's Predictive Policing Practices
Burglar Jailed After Falling into Home-Made Trap in Blyth
Sellafield Nuclear Site Exits Special Measures for Physical Security Amid Ongoing Cybersecurity Concerns
Avian Influenza Impact on Seals in Norfolk: Four Deaths Confirmed
First Arrest Under Scotland's Abortion Clinic Buffer Zone Law Amidst International Controversy
Meghan Markle Rebrands Lifestyle Venture as 'As Ever' Ahead of Netflix Series Launch
Inter-Island Ferry Services Between Guernsey and Jersey Set to Expand
Significant Proportion of Cancer Patients in England and Wales Not Receiving Recommended Treatments
Final Consultation Launched for Vyrnwy Frankton Power Line Project
Drug Misuse Deaths in Scotland Rise by 12% in 2023
Failed £100 Million Cocaine Smuggling Operation in the Scottish Highlands
Central Cee Equals MOBO Awards Record; Bashy and Ayra Starr Among Top Honorees
EastEnders: Four Decades of Challenging Social Norms
Jonathan Bailey Channels 'Succession' in Bold Richard II Performance
Northern Ireland's First Astronaut Engages in Rigorous Spacewalk Training
Former Postman Sentenced for Series of Sexual Offences in Northumberland
Record Surge in Anti-Muslim Hate Crimes Across the UK in 2024
Omagh Bombing Inquiry Concludes Commemorative Hearings with Survivor Testimonies
UK Government Introduces 'Ronan's Law' to Combat Online Knife Sales to Minors
Metal Detectorists Unearth 15th-Century Coin Hoard in Scottish Borders
Woman Charged in 1978 Death of Five-Year-Old Girl in South London
Expanding Sinkhole in Godstone, Surrey, Forces Evacuations and Road Closures
Bangor University Announces Plans to Cut 200 Jobs Amid £15 Million Savings Target
British Journalist Charlotte Peet Reported Missing in Brazil
UK Inflation Rises to 3% in January Amid Higher Food Prices and School Fees
Starmer Defends Zelensky Amidst Trump's 'Dictator' Allegation
Zelensky Calls on World Leaders to Back Peace Efforts in Light of Strains with Trump
UK Prime minister, Mr. Keir Starmer, has stated that any peace agreement aimed at ending the conflict in Ukraine "MUST" include a US security guarantee to deter Russian aggression
×