Capital Macro: UK PMI suggests inflation may peak at around 5%

Capital Economics said that the preliminary PMI survey for April in the UK shows that businesses are facing higher cost pressures than expected. This is in line with the peak of CPI rising to around 5.0%. The PMI data suggests that the economy is performing better than expected, with the composite PMI rising from 50.3 in March to 52.0 in April. This may make some Bank of England policymakers more concerned about the risk of high inflation rather than the risk of economic growth slowing down. However, the strong PMI may reflect pre-war momentum and hoarding behavior, which means that future economic activity may still weaken.