Final PMI survey data for October support the case for interest rates to remain on hold in the UK. Service sector business activity fell for a third month running, sending an early signal of economic malaise extending into the fourth quarter.

The data come on the heels of the Bank of England's Monetary Policy Committee having voted to maintain its key policy rate at 5.25% at its November meeting, holding rates steady for a second month after a run of 14 consecutive rate hikes.

The decision was not unanimous. Six MPC members chose to hold rates steady while three voted for a further 25 basis point rate hike, reflecting the stickiness of inflation. CPI inflation continued to run at 6.7% in September compared to the bank's 2% target.

Importantly the downturn in activity signalled by the PMI has been accompanied by a waning of inflationary pressures in recent months: the PMI survey input price gauge covering goods and services has fallen to its lowest since the start of 2021, dropping in October to a level encouragingly close to its long-run average.

If anything, the PMI data therefore hint at greater downside risks to the economy and inflation than currently anticipated by policymakers, and will be important to watch in the coming months to assess upcoming policy decisions.

Chris Williamson, Chief Business Economist, S&P Global Market Intelligence

Tel: +44 207 260 2329

chris.williamson@spglobal.com

Purchasing Managers' Index™ (PMI®) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.