The UK S&P Global Manufacturing PMI for February came in at 52. This was above the forecast of 51.8.
A reading above 50 indicates expansion in manufacturing activity. The February result therefore points to growth in the sector.
Uk Manufacturing Momentum Strengthens
The February manufacturing PMI report shows a figure of 52, which is stronger than the forecasted 51.8 and marks the second consecutive month of expansion. This positive surprise suggests the economic weakness we observed in the final quarter of 2025 is now reversing. The underlying momentum in the UK economy appears more robust than many had anticipated.
This unexpected strength will likely force the Bank of England to reconsider the timing of any potential interest rate cuts. With the most recent January 2026 inflation figures showing core CPI holding at 2.9%, well above the 2% target, this growth indicator reduces the chances of a policy pivot anytime soon. We see markets now pushing back expectations for the first rate cut from late Q2 into Q3 2026.
For equity traders, this points towards favouring the domestically-focused FTSE 250 index over the more international FTSE 100. Looking back at a similar period of domestic outperformance in mid-2025, the FTSE 250 gained over 3% against its large-cap peer in the following month. We should consider buying call options on FTSE 250 ETFs to position for this potential upside.
In the currency market, this data reinforces sterling’s recent strength, particularly against the US dollar. The latest US retail sales data from last week came in weaker than expected, creating a clearer policy divergence that favours the pound. Therefore, buying GBP/USD call options with expirations in the coming weeks seems like a logical way to trade this divergence.
Regarding interest rates, the data implies yields on UK government bonds have room to move higher as the market reprices a more hawkish Bank of England. The UK 2-year gilt yield, which is highly sensitive to monetary policy, has already ticked up to 4.55% this morning on the news. We should anticipate further upward pressure and could position for it by selling short-sterling or gilt futures contracts.
