Thomas Pugh, Chief Economist at leading audit, tax and consulting firm RSM UK said: “The jump in the flash composite PMI suggests that strong growth can continue through Q4. At the same time, the employment PMI increasingly suggests that the labour market is turning a corner. The MPC might take some comfort from the output price balance easing back a little, but the price balances are still consistent with sharply accelerating inflation. Overall, October’s PMI adds to the case for a rate hike next month.

“At 53.1 the PMI is consistent with quarterly growth of around 0.3-0.4% in Q4. What’s more, the employment balance rose above 50 for the first time since September 2024 which suggests strong growth is now feeding through to hiring and firms have finally completed their adjustment to higher employment costs.

“That said, the next six months still look much more challenging. Rising natural gas prices will prompt a big hike to the Ofgem price cap in January, lifting inflation to a peak of around 4.5%. Indeed, the input price balance rose to a four-month high. The good news for the MPC is that the output price balance eased back a little, suggesting firms are absorbing higher input costs through margins.

“In any case, the output price balance is still consistent with rising inflation, while strong growth and an improving labour market means the MPC is running out of reasons to stay on hold, so we expect the Committee to hike rates next month and at least once more next year.”

Commenting on the latest Flash Manufacturing PMI which rose to 52.8 in October, Emily Sawicz, Director and Industrials Senior Analyst at RSM UK, added: “October’s manufacturing PMI reading of 52.8 came in better than expected, underlining the resilience of the sector despite continued cost pressures. This extends a recovery that has kept the sector above the 50 threshold for almost a year, although momentum has largely plateaued since reaching a peak in May.

“There are clear reasons for optimism. Manufacturing has recently contributed to stronger-than-expected GDP growth and demand within the investment goods sector remains robust. In addition, the orders-to-inventory ratio has reached its highest level since March, suggesting there is still activity moving through the pipeline. However, manufacturers continue to face rising energy, fuel and labour costs, creating pressure on margins.

“The October reading reinforces the picture of a sector that is resilient. The recovery from 2025's low is real, but manufacturers are entering the final months of the year against a backdrop of elevated cost pressures, weaker export demand and ongoing uncertainty surrounding the economic outlook.

“All eyes will now turn towards next week’s Budget. Energy relief remains the measure manufacturers most need, but it is unclear whether the Chancellor will deliver it. Removing policy levies from industrial electricity bills, protecting the funded defence programme and setting out a credible funding plan would give businesses confidence in the UK’s long-term industrial capacity. Without that, we risk setting ambitious defence targets while losing the manufacturing base needed to deliver them.”

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