The week ahead 09 December 2024 - UK PMI revised upwards for November
What to watch out for in the UK economy and property market this week.
Last week saw the PMI indices for November for the major global economies revised based on additional data, which had a positive outcome for the UK. The convention of the index is that a reading under 50 points to a contraction for the commercial side of the economy. The preliminary November figure for the UK was 49.9, but the final number based on the complete data was 50.5. There was a marked difference though between the readings for services (50.8) compared to manufacturing (48.00). Across the major economies, services outperforming manufacturing has been a recurring theme for a while now.
Another interesting trend that the PMI data has further illustrated is the UK is outperforming its major European peers. Britain is the only large European economy over the 50 mark in the PMIs currently, with the Euro Area at 48.3, France at 45.9, Germany at 47.2 and Italy at 47.7 in November. In the last three years, the UK PMI has registered more months above the pivotal 50 mark than the other European economies mentioned above. Britain may well slide below 50 in the December PMI figures, however the idea that a post-Brexit UK might struggle to match the growth of other large European nations is looking discredited.
Last week also saw some punchy data on the UK housing market. In November, the Nationwide UK house price index grew by 1.2% month-on-month and 3.7% on an annual comparison, in both cases beating forecasts by a significant margin. Subsequent data from Halifax painted a similarly upbeat picture, with a 1.3% m-on-m increase in prices reported. This follows numbers from the Bank of England showing an increase in mortgage lending in October. Overall, 2024 has been a year of growth for the housing market, and we believe momentum will continue into 2025.
This week sees UK GDP figures for October released. September saw a modest contraction for GDP of -0.1%, although that was partly due to noisy data. We suspect November will show a return to growth, albeit at a sluggish pace and largely driven by the services sector.
In the Euro Area, the ECB will announce its policy interest rate decision on Thursday. Survey evidence points to a lack of confidence in the outlook among businesses, which will probably encourage rate setters to prioritise supporting growth. Consequently, we are forecasting a 25 bps interest rate cut. Following the collapse of the French government last week, at a time when Germany is heading towards a general election, the Eurozone is now facing significant political uncertainty among core nations.
This week’s figures
THURSDAY 12 DECEMBER
UK GDP, m-on-m, October
-0.1% previous
0.1% forecast
Based on survey evidence which points to growth that is slow but holding up, we are forecasting modest GDP growth in October, probably driven by the services sector.
THURSDAY 12 DECEMBER
ECB Interest Rate Decision, December
3.25% previous
3.00% forecast
With inflation low and business sentiment weakening, we are predicting the ECB will once again reduce its policy rate. We expect Eurozone interest rates to fall below 2.0% next year.
THURSDAY 12 DECEMBER
US CPI Inflation, November
2.6% previous
2.6% forecast
October saw US inflation tick upwards, partly due to increases in electricity and natural gas prices. We believe those pressures may have moderated in November and are forecasting no change for CPI inflation at 2.6%.
