The week ahead 28 October 2024 - PMIs point to economic deceleration
What to watch out for in the UK economy and property market this week.
The preliminary PMI figures for October pointed to slowing growth for several large economies. The UK composite PMI read at 51.7 for October, down from 52.6 in September. The consensus forecast was for no change, although the UK data looked good compared to some other G7 nations. The convention of the index is a reading over 50 points to a growing economy, but the figure for France was 47.3, while Germany stood at 48.4 and Italy at 49.7. The US however bucked the trend with a reading of 54.3 in October, up from 54.0 in September. Overall, it looks like the global economy has hit an autumn soft patch, and this will heap pressure on central banks outside the US to cut interest rates further and faster than previously anticipated. Indeed, the Bank of Canada cut rates by 50 bps last week to 3.75%. The Bank of England’s next policy meeting is on 7th November and we are forecasting at least a 25 bps Base Rate reduction, and view 50 bps as a possibility.
The big news story for this week is the UK government’s Autumn Budget on Wednesday. An array of possible tax hikes and spending cuts have been leaked to the press, presumably to gauge the reaction from the financial markets to each possibility. An increase in the employer side of the National Insurance contribution is emerging as a likely option, which will probably have a modest dampening effect on employment growth. Government department budgets will probably come under pressure, which could lead to cuts to public services and the downsizing of civil service headcount. On a more encouraging note, it looks likely that changes to the fiscal rules will allow continued investment in infrastructure projects which in the long-run could improve the nation’s productivity.
This week also sees data released on the UK housing market which we believe will be upbeat in tone. On Tuesday numbers are out on mortgage approvals, while Nationwide publishes its house price index on Friday. We are forecasting both to slow compared to strong numbers the previous month, but to levels that still point to a healthy market. Also, out this week are GDP figures for the US and the Euro Area, and we are predicting both to show continued growth.
This week’s figures
TUESDAY 29 OCTOBER
UK Mortgage Approvals, September
64.9k previous
64.0k forecast
Mortgage approvals in August hit their highest level since September 2022. While we are predicting a step back from that strong figure, our forecast of 64,000 is still consistent with a buoyant market.
WEDNESDAY 30 OCTOBER
US GDP Growth, q-on-q, annualised, Q3
3.0% previous
3.0% forecast
With inflation steadily declining and the labour market holding up well, we are forecasting a similar level of growth as was seen in Q2.
Euro Area GDP Growth, q-on-q, Q3
0.2% previous
0.2% forecast
Lower interest rates should have helped support growth over the summer, plus major sports tournaments may have bolstered the consumer side of the economy, particularly in France.
FRIDAY 1 NOVEMBER
Nationwide UK House Price Index, y-on-y, October
3.2% previous
2.9% forecast
We feel momentum in the market remains strong, thanks to lower mortgage rates compared to earlier this year, and are predicting further house price growth for October.
