Despite the composite PMI staying at 50.5 in December, at face value it’s consistent with the 0.1% q/q rise in real GDP in Q3 being followed by a 0.3%q/q contraction in Q4. Admittedly, we doubt the economy will be quite as weak as that given the PMIs do not capture rises in government spending. Even so, a stagnating economy coupled with a reacceleration in price pressures suggests the Bank of England is likely to continue to cut interest rates only gradually.
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