The week ahead 02 December 2024 - Mortgage approvals beat forecasts
What to watch out for in the UK economy and property market this week.
The latest UK mortgage approval figures from the Bank of England pointed to ongoing strength in the housing market. October saw 68,300 approvals, up from 65,700 in September, suggesting evidence the economy is slowing has not dampened the mood of home buyers. New mortgage lending also increased by £3.4 billion in October versus £2.9 billion in September. For both approvals and lending, the figures came in ahead of forecasts. While analysts now expect the Base Rate to fall at a slower pace than previously assumed, the big picture is that further rate cuts are expected over the next 12-months. Consequently, we believe the housing market looks well positioned to successfully ride out the current slowdown for the UK economy.
The UK car industry saw negative headlines last week, as data from the Society of Motor Manufacturers and Traders highlighted weaker production this year. October 2024 saw 77,500 cars built, down by 15.3% on the same month a year ago. Output in the first ten months of 2024 was 10.8% lower than the equivalent period of 2023. Last week also saw global motor giant Stellantis announce the closure of a van factory in Luton, although £50 million will be invested in its plant at Ellesmere Port. This follows layoffs by Ford in the UK and elsewhere in Europe. Recent PMI figures have pointed to weakness for the broader manufacturing sector, both in the UK and abroad.
Turning to international news, inflation in the Euro Area increased from 2.0% in October to 2.3% in November, based on provisional figures. Core inflation (which excludes volatile items like food and fuel) remained unchanged at 2.7%, and consequently we believe the European Central Bank will still cut interest rates at its December policy meeting in order to continue supporting GDP growth.
This week sees the US publish employment growth figures for November. The data was weak in October, probably reflecting uncertainty surrounding the general election, with pre-poll concerns there might be a disputed outcome. Given the clear win for Trump and the accompanying stock market rally, we suspect many US firms have pressed ahead with recruitment in November. Indeed, there may be an element of some vacancies which were put on hold in October having been filled in November.
On Wednesday, the Chair of the US Federal Reserve, Jerome Powell, will give a speech, and we believe financial markets will be closely monitoring his comments. We suspect Powell will be hawkish in tone given recent signs President-elect Trump appears set to press ahead with increasing tariffs on foreign goods, something which could stoke inflation.
This week’s figures
WEDNESDAY 4 DECEMBER
UK Final Composite PMI, November
51.8 previous
49.7 forecast
The early ‘flash’ UK PMI figure (based on survey returns received so far in late November) slid to 49.9. We suspect later submissions will reflect growing concerns over the strength of growth, so we are predicting a downwards revision.
THURSDAY 5 DECEMBER
Euro Area Retail Sales, y-on-y, October
2.9% previous
2.3% forecast
We believe higher energy bills in the autumn, plus general concerns over the economic outlook, may have slowed retail sales in the October.
FRIDAY 6 DECEMBER
US Non-Farm Jobs, November
12k previous
190k forecast
With the general election out the way, we are predicting the lifting of political uncertainty may have persuaded more firms to press ahead with plans to recruit, resulting in a rise in jobs growth.
