The UK private sector remained in marginal growth in February 2025, but the sharpest decline in employment since November 2020 overshadowed this fragile expansion. The flash PMI composite output Index dipped slightly to 50.5, signalling continued, albeit weak, economic activity. While services activity strengthened (at 51.1, 0.1 points above the consensus forecast), manufacturing slumped further (to 46.4), 2.1 points below the consensus forecast and marking a 14-month low. New business fell at its fastest rate in 18 months as clients cut budgets and business investment stalled. Export orders also declined sharply, reflecting weaker demand from the EU and US.

The combination of rising payroll costs, automation trends, and weak demand led to a steep decline in employment, with businesses opting not to replace departing staff. Inflationary pressures intensified, driven by higher wages, raw material costs, and upcoming national insurance hikes, pushing factory gate price inflation to its highest since April 2023.

Despite these challenges, business confidence saw a modest uplift, with firms cautiously optimistic about their expansion plans. However, geopolitical uncertainty and macroeconomic headwinds continue to weigh on sentiment, leaving the RPI at 39 and the RPI-P at 29, meaning that economic activities in the UK economy are well ahead of market expectations.

Manufacturing is expected up to 48.5 from 48.3 and services up to 51.0 from 50.8.

The flash Composite Purchasing Managers’ Index (PMI) provides an early estimate of current private sector business activity by combining information obtained from surveys of the manufacturing and service sectors of the economy, around 650 companies in each case. The flash data are released around ten days ahead of the final report and are typically based upon around 75-85 percent of the full survey sample. Results covering a range of variables including manufacturing output, employment, new orders, backlogs and prices are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The report also contains flash estimates of the manufacturing and services PMIs. The survey is produced by S&P Global.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' surveys, investors will know what the economic backdrop is for the various markets. The flash PMIs are particularly closely watched as they provide a wide ranging look at economic developments and some of the most up to date information available. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.