FTSE Falls After PMI Data Showed Largest Decline in New Jobs Since the Pandemic
Preliminary PMI data showed a greater than forecast rise but indicated a sharp loss of job creation.
- Preliminary Composite PMI up at 50.9
- Jobs slashed at fast rate since 2021
- Fears of Stagflation on the horizon
The FTSE dropped 0.35% this morning after PMI data showed a small uptick in activity. But also gave insights into the speed of new job losses.
PMI Data: Good But Not So Good
Preliminary PMI for manufacturing, services, and composite all posted greater than forecast gains.
| January 2025 | Previous | Forecast | Actual |
| S&P Composite PMI | 50.4 | 50 | 50.9 |
| S&P Services PMI | 51.1 | 50.9 | 51.2 |
| S&P Manufacturing PMI | 47 | 47 | 48.2 |
All three indexes beat forecasts and the previous month’s data. Services showed an expanding economy, while manufacturing continued to remain in contraction.
The positive data was not met with the usual upward momentum by the FTSE. The PMI survey showed employers were cutting back on recruitment at the fastest pace since the pandemic.
The main reason for concern for employers is the budget announced in October 2024. One of the main provisions was the implementation of higher social security taxes for employers and higher minimum wages.
The budget includes a hike on social security payments to 15% on all salaries above 5,000 pounds, from 13.8% on salaries above 9,100 pounds.
The sharp loss of jobs in the January PMI survey comes days after UK retail grocer J Sainsbury said it was slashing 3,000 jobs and reducing senior management by 20%.
FTSE Live Chart
BoE Conundrum
Inflation figures have not been friendly over the past months and have made the BoE place interest rate cuts on pause. December data showed a small decline to 2.5% but November data was at 2.6%.
The 3 months on inflation data have printed well above the 2% target of the central bank. At the same time, economic activity is showing signs of weakness.
Quarterly GDP Growth YoY has failed to break above 1% since the last quarter of 2022. While Retail Sales contracted for the third time in 4 months.
Yesterday’s CBI Business Confidence fell to -47 from -24 last month. Indicating just how UK companies are feeling about the economic future in 2025.
The higher than desired inflation and a stagnant economy are leading to real fears of stagflation. The BoE is now troubled with the conundrum of lower interest rates to improve the economy and the risk of even higher inflation.
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