PMI February ‘rebound’ now threatened by Gulf instability
10 Mar 2026
Hopes that the positive results maintained on manufacturing orders would boost the economy could now be dashed by the recent surge in gas and oil costs, suggest analysts.
The most recent CIPS manufacturing purchasing managers’ index (PMI) showed strong performance for February.
This registered at 51.7, following on from January’s 51.8 with output increased to 52.5 and “a healthy order pipeline” with a rise in new export orders said RSM UK head of industrials Mike Thornton. Reductions in levels of finished stock also suggested greater demand.
However, the organisation’s chief economist Thomas Pugh also warned performance could be vulnerable to global events, notably the latest Gulf conflict.
“If the recent surge in oil and gas prices is sustained this could offset much of the sharp drop back to 2.0% inflation that we currently expect in April,’ stated Pugh.
He added that a sustained rise in energy prices would prevent the Bank of England cutting interest rates further, even if economists applied the standard reaction of ‘looking through’ any jump in inflation that was due to energy prices.
“The Bank may not feel like it has that luxury right now as inflation expectations remain elevated and memories of the Russia-Ukraine crisis are still relatively fresh,” he continued.
On the domestic front, the strong performance from major firms such as JLR, BAE and Rolls-Royce would probably be beneficial for middle market supply chains, advised Thornton.
That said, “crippling’ energy costs were expected to persist this year, he said.
“However, we now fear that input prices driven by oil will rocket on the back of the Middle East warfare which would derail future growth and investment across UK industry; and adds mounting pressure on prices.”
Pugh concurred, adding that, although the PMI report showed the private sector “rebounding” in February, this was likely to be immune to the effect of events overseas.
“The question now is to what extent the surge in uncertainty weighs on activity in March, and how long energy prices remain elevated as this will determine whether cost pressures for firms start to rise again, instead of abating as we expected,” he stated.
