UK Activity Rises to 53.1 in October as Price Pressures Accelerate
Key Facts
The UK’s preliminary composite output index rose to 53.1 in October from 52.0 in September, recording the fastest activity growth since February and extending the expansion for a fourth consecutive month, according to an S&P Global survey. The firm said the reading was statistically consistent with quarterly gross domestic product growth of 0.7%. Improvement spanned services and manufacturing, which recorded identical rates of expansion during the month. Factory output growth was the strongest since September 2024, while services recorded their fastest growth since February. The reading points to a strong start to the fourth quarter as companies face higher input costs.
Demand improved more clearly in services, where new orders posted their largest monthly increase since August of the previous year, according to S&P Global. Export sales rose for the first time since February, alongside an improvement in manufacturing orders. The firm said better demand conditions encouraged companies to add staff for the first time since September 2024. The increase in hiring came from services, while manufacturers slightly reduced headcount. The divergence in hiring between the two sectors indicates that the survey’s labor-market gains were concentrated in services despite growth broadening to factories.
By contrast, input cost inflation accelerated in both manufacturing and services, according to the survey. Companies cited higher energy and fuel prices and shipping fees as cost pressures. Companies again raised the prices they charge for goods and services sharply. These indicators follow a 3.5% year-over-year rise in UK consumer prices in September, versus 3.1% in August, according to Office for National Statistics data reported by the Associated Press. September’s reading was above economists’ average forecast of 3.4% and the highest since October of the previous year. S&P Global said, "Input cost inflation accelerated in both manufacturing and services."
In the labor market, the unemployment rate was 4.7% for people aged 16 and over in the period from June to August, down 0.1 percentage point from the previous quarter and the same period a year earlier, according to the Office for National Statistics. That reading alone does not indicate the course of the rate decision, but it comes alongside companies’ return to hiring in the activity survey. S&P Global said optimism about business growth remained below the survey’s long-run average. Companies also expressed concern about energy costs, taxes, policy changes and borrowing costs. This comes as signs of improving demand and activity meet price pressures that may keep inflation at the center of monetary-policy debate.
Survey indicators diverge from the latest available official GDP data: the UK economy grew 0.1% in August, after expanding 0.4% in both July and June, while growth in the three months to August was 0.7%, according to the Office for National Statistics. Official data also showed real GDP rose 0.5% in the second quarter, after the estimate was revised up by 0.1 percentage point. S&P Global said October’s index reading was consistent with quarterly growth of 0.7%, an estimate derived from the survey rather than official GDP calculations. In the interest-rate market, the firm said markets had fully priced in a 25-basis-point increase to 4% at the Monetary Policy Committee’s November meeting. That remains market pricing, not an announced Bank of England decision.
Upcoming dates include the UK budget statement on October 28, ahead of the publication of the Monetary Policy Committee meeting summary and minutes on November 5, according to Parliament and the Bank of England. The Treasury said the budget would set out the government’s plans for the economy, taxes and spending. The current Bank of England base rate is 3.75%, according to the bank. The next inflation data are due on November 18, after September data were published on October 21, according to the Office for National Statistics. The budget and the Bank’s meeting therefore come before the next inflation reading.