In last week’s diary we overlooked the latest UK PMI (purchasing managers’ index) readings, which were due on 22 February, on the basis they seldom elicit much of a market response.

Given services make up the biggest component of the UK economy – as they do in other developed countries, especially the US – the fact the PMI reading was not only in positive territory but ahead of estimates suggests there is grounds for optimism.

The services PMI came in at 54.3, above the consensus of 54.2 and cementing the index firmly in ‘expansion’ territory. This fed through into the composite PMI indicator, which rose from 52.9 to 53.3, again beating forecasts and showing the overall economy to be in expansion mode.

According to index and data compiler S&P Global, the February data highlighted ‘a solid improvement in customer demand, as signaled by the sharpest rise in new work for nine months’, while hopes of a sustained rebound in domestic economic conditions led to the highest level of optimism regarding the year ahead business outlook since February 2022 according to the report.

This led some observers to question whether the ‘technical recession’ which the economy entered in the back half of 2023 isn’t in fact already over.

There will be precious few clues to the state of the UK next week, bar February retail sales data, so all eyes will be on US macro releases and the European Central Bank meeting.

 The Fed – and Fed-watchers – will pay close attention to the PCE (personal-consumption expenditure) measure along with the PMI (purchasing managers index) surveys for evidence of price pressures, while the JOLTS (job openings and labour turnover survey) release mid-week has the potential to upset the apple-cart as job creation has been consistently above expectations for the last couple of months.

There will also be an intense focus on the ECB’s governing council meeting on 7 March after rates were left unchanged in January and bank president Christine Lagarde pushed back on talk of policy reversal due to ‘abundant’ price pressures. 

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