A survey of purchasing managers from S&P Global also showed a “sustained increase” in prices that adds to pressure on the Bank of England to raise interest rates again. Its composite reading of private sector output rose to 53 in February from 48.5 the month before, well above the 49 reading economists had expected.
The pound jumped after the announcement, hitting the day’s high against the dollar and the euro, while UK gilts fell, led by losses in shorter maturities. “This will add to the pressure the BOE is already under to raise interest rates further,” said Stuart Cole of Equiti Capital. “The risk that the BOE may have to engineer a recession to bring CPI back to target.”
The sharp uptick in February was driven by rising customer demand and increasing confidence among business executives after a subsidence in the market turmoil triggered by then-Prime Minister Liz Truss’s budget plan.