BoE: Strong PMIs challenge rate cut pricing – Nomura
|Nomura analysts note that the UK composite output PMI rose to 53.9 in February, defying expectations of a decline. They see stronger activity pointing to 0.2% quarter-on-quarter GDP growth in Q1, with upside risks. While still forecasting Bank of England rate cuts in March and June, they question market confidence in more than 20bp of easing priced for March.
Robust UK data versus easing expectations
"The UK composite output PMI rose 0.2 points to 53.9 in February, against our and consensus expectations of a fall."
"The details were fairly strong too, as manufacturing output was up 2.0pts and though the services output index fell 0.1pt it stayed high at 53.9."
"Also, the composite orders and employment PMIs both moved higher (though the employment index remains below 50 indicating contraction)."
"The strong activity data for both January and February suggest GDP growth will pick up in Q1."
"We forecast 0.2% q-o-q growth following 0.1% in Q4 2025; however, following today’s data there are upside risks to our view (notwithstanding the fact that the relationship between official estimates of economic growth and the PMIs in the UK is not as strong as it is in the euro area)."
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