U.K. PMIs Show Record Inflation and ‘Green Light’ for BOE Hike
U.K. companies reported the strongest inflation in more than two decades during November, adding to pressure on the Bank of England to lift interest rates as early as this month.
IHS Markit Ltd. said 63% of purchasing managers reported increased cost burdens, driving the fastest growth in an index tracking inflation since the report started in 1998.
The gains were powered by higher wages and a surge in the prices paid for energy and raw materials. A composite index charting economic activity was little changed at 57.7, slightly stronger than the 57.5 expected by economists.
The figures add to evidence of a broad-based increase in prices across the U.K. economy, something BOE policy makers have said will require a tightening of monetary policy.
While the central bank has been reluctant to specify when it will act, investors have priced in a rate rise on Dec. 16 as a near certainty. The survey also indicates strength in the economy likely to produce a spurt of growth at the end of the year after a slowdown in the past few months.
“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,” said Chris Williamson, chief business economist for Markit. “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 pickup in GDP growth.”
Markit said its index of manufacturing rose to a three-month high of 58.2, stronger than the 57.3 reading anticipated by economists. The services index was 58.6, down slightly from October’s 59.1. Markit said new orders rose at the strongest pace since June.
Staffing numbers rose for a ninth month but also at the weakest pace since April. Companies reported difficulty recruiting staff and unexpected departures, some for higher pay.
“For policy makers concerned about the health of the labor market after the end of the furlough scheme, the buoyant jobs growth signaled should bring some reassuring comfort,” Williamson said.
An index of output prices remained elevated but was slightly lower than in October, with some firms citing “greater resistance to higher selling prices among clients,” Markit said.
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