The week ahead 14 October 2024 - UK Economy Recovered in August
What to watch out for in the UK economy and property market this week.
Having flatlined in June and July, UK GDP returned growth in August, with a month-on-month expansion of 0.2%, which was in line with forecasts. The Services sector of the economy saw growth of 0.1%, the same as in the previous month, however there were rebounds for the Production and Construction sectors after having contracted in July. Within Services, the strongest growth came from the Professional, Scientific and Technical sub-sector. This bodes well for office and lab space demand. The Production figures benefited from a return to growth for Manufacturing of Motor Vehicles after a difficult July. Improved GDP growth figures will be a relief to the government. However, the economy clearly slowed over the summer, with the uncertainty surrounding the upcoming autumn Budget probably part of the reason.
Given events in the Middle East, plus the Gulf of Mexico hurricanes, the oil price has experienced a volatile fortnight. Brent Crude finished September at $71.70 a barrel, but at the time of writing on Friday afternoon it stood at $79.00. Clearly there is a high risk of further escalation in the Middle East, which could spark more price volatility in the coming weeks. What the impact will be on global inflation is difficult to gauge, as much will depend on how long the current uncertainty persists. At $79 a barrel on Friday, oil is still below recent peaks –it was trading above $85 back in July and over $90 in April –and given a lot of oil is purchased months in advance on futures contracts it would be more of a concern from an inflationary perspective if oil was beating its previous highs.
This week sees the release of UK retail sales data for September. An important factor shaping retail sales lately has been the weather, and September saw heavy rainfall in parts of England, which may have reduced footfall. However, the recent British Retail Consortium figures for September were relatively upbeat, due to strong autumn fashion sales and some last-minute back-to-school / off-to-university shopping. Consequently, we are forecasting retail sales growth to have decelerated compared to August but to a level that is still robust.
This week's figures
Tuesday 15 October
UK Unemployment Rate, August
4.1% previous
4.2% forecast
Given GDP growth slowed over the summer and interest rates remain high, we are predicting a small rise in the unemployment rate, although this indicator has been difficult to forecast lately.
Wednesday 16 October
UK CPI Inflation, y-on-y, September
2.2% previous
2.1% forecast
With interest rates still high by historic standards and pay growth slowing, we are forecasting inflation to remain close to the Bank of England’s 2.0% target.
Thursday 17 October
ECB Interest Rate Decision, October
3.50% previous
3.25% forecast
With inflation down to 1.8% for the Euro Area, we believe the ECB will now be focussed on supporting growth and are predicting a 25 bps policy rate cut.
Friday 18 October
UK Retail Sales, y-on-y, September
2.5% previous
2.0% forecast
We believe retail sales slowed in September in part due to poor weather, but this was partly counterbalanced by stronger autumn fashion sales.
