Investing.com -- United Kingdom (TADAWUL:4280)’s composite Purchasing Managers’ Index (PMI) for April indicated a sharper-than-anticipated decline, suggesting that the recent turmoil caused by the United States tariffs may exert more pressure on the British economy than initially anticipated.
The composite PMI fell from 51.5 to 48.2, a sharper decline than the consensus forecast of 50.4. The drop reflects contractions in both the manufacturing and services sectors.
The manufacturing output balance decreased from 45.3 to 44.0, while new export orders plunged to their lowest level since May 2020, falling from 40.8 to 36.3.
The services PMI also retreated, dropping from 52.5 to 48.9. Furthermore, the future activity balance hit its lowest point since April 2020, indicating a potential slowdown in economic activity ahead.
Inflationary pressures remain persistent, as both composite input and output prices balances surged to their highest since the first half of 2023.
The services output prices balance, in particular, suggests a rise in services CPI inflation from 4.7% in March to over 5.0% within six months.
Despite the potential for U.S. tariffs to eventually lead to lower inflation in the U.K., current price pressures are likely to prompt the Bank of England to continue reducing interest rates gradually, according to Capital Economics
The firm anticipates a decrease from the current 4.50% to 3.50% by the first half of the next year.