UK Economics: Further weakness in UK PMIs

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UK Economics: Further weakness in UK PMIs

Flash |

23 Jun 2026 09:07:47 ET │ 9 pages

UK Economics

Further weakness in UK PMIs

CITI’S TAKE

Another downside surprise on the UK PMIs suggests to us an underlying

weakness in domestic demand, underpinning what could be a nascent

weakness in the service sector. Absent resilient manufacturing, which we

think will start to retreat over the coming months, the result could be a

weaker Q2 GDP print than expected and a potentially more dovish outlook Callum McLaren-StewartAC

for monetary policy should firms prove unable to effectively pass on prices +44-20-7500-1604

to consumers. callum.mclarenstewart@citi.com

May RostomAC

UK PMIs were weaker than expected this morning, with the composite survey +44-20-7986-2154

showing contraction for the second consecutive month. Manufacturing was the only may.rostom@citi.com

bright spot in the data but we expect this to retreat over the coming months given the

apparent influence of front-loading. Services, which we think gives the better steer on

the economic outlook, remained in contraction for the second consecutive month

(something not seen since 2023) thanks to a large drop in private sector sales. The

picture remains stagflationary but the underlying weakness in domestic demand

suggests to us that the greater emphasis ought to be placed on stagnation, as we see

higher input prices as likely fall short of realising higher output, resulting in firms

adjusting via the labour market and ultimately culminating in a weaker economic

outlook in the Q2 GDP print.

The relationship between the composite flash and GVA implies marginally negative

growth in Q2. While we think this relationship is far from convincing (and should not

be conflated with a forecast), it strikes us as credible.