The week ahead 18 November 2024 - UK GDP figures disappoint
What to watch out for in the UK economy and property market this week.
The Q3 UK GDP figures came in weaker than expected at just 0.1% q-on-q growth, down from 0.5% for Q2 and lower than the consensus forecast of 0.2%. The manufacturing sector was partly responsible for the slowdown, although for many service sector industries the figures were also sluggish. The UK benchmarked poorly on an international comparison with q-on-q growth of 0.7% for the US in Q3, 0.4% in the Euro Area and 0.2% for Germany.
Oxford Economics released a note cautioning against reading too much into the figures, citing “noisy data”. For instance, there was as an unexpected drop in the information and communication sector output in September, which may prove to be a one-off. Nevertheless, both the PMI and consumer confidence data has been slipping lately, pointing to a deceleration for the economy. If there is more evidence in the coming weeks suggesting growth is deteriorating, it may persuade the Bank of England to move towards another Base Rate cut sooner than previously anticipated.
From a property perspective, it is worth noting the figures for GDP growth by industry over the first nine months of this year. The fastest growing sector has been Transport and Storage, which has seen output rise by 4.7% year-to-date, which is good news for sheds. The second largest expansion was for Professional, Scientific and Technical industries (up 3.6%), which bodes well for office and lab space demand.
Turning to other news, the Treasury has announced plans to consolidate the UK’s 86 local authority pension funds into eight ‘super’ funds. This will increase both scale and expertise. The super funds of Australia and Canada have historically been major players in real estate markets, both at home and abroad, so this is a development worth monitoring for the UK property industry.
This week will see the release of CPI inflation figures for the UK. Given the new and higher Ofgem energy price cap came into effect in October, it is highly likely inflation will increase. The Bank of England will be closely watching core inflation, which excludes energy and food, for signals on whether underlying inflationary pressures are still declining. After the disappointing GDP figures, an abrupt slowing of core inflation would cause concern among rate setters.
Also, for most of the leading global economies, ‘flash’ PMI figures for November will be released on Friday. This will provide an early clue on how well the tax hikes announced in the Budget have been received by UK firms.
TUESDAY 19 NOVEMBER
UK CPI Inflation, y-on-y, October
1.7% previous
2.0% forecast
The increase in the Ofgem energy price cap in October has pushed up gas and electric bills for UK households, so we are forecasting an increase in CPI inflation.
THURSDAY 21 NOVEMBER
Euro Area ‘Flash’ Consumer Confidence, November
-12.5 previous
-12.3 forecast
Given recent interest rate cuts and lower inflation, we believe Eurozone consumers will be feeling less under pressure, resulting in a small improvement in confidence.
FRIDAY 22 NOVEMBER
UK ‘Flash’ Composite PMI, November
51.8 previous
51.5 forecast
Following tax increases in the Budget, and increased concerns over the outlook for exports to the USA, we are forecasting a marginal decline for the UK PMI index.
