The week ahead 06 January 2025 - UK manufacturing slowed in December

What to watch out for in the UK economy and property market this week.

The final reading for the UK manufacturing PMI saw a downwards revision, confirming the sector is passing through a difficult period. The early flash estimate for December was 47.3, but the final number was cut to 47.0 after the outstanding survey returns were added in. This was down on the November figure of 48.0. A reading under 50 suggests output is contracting, and December was the third month in a row manufacturing was below that level. The decline was partly due to customers choosing to run down stock levels, which is common during an economic slowdown as firms try to limit expenditure. Presently, manufacturing is performing weakly in most major economies around the world.

Last week also saw the release of UK consumer credit figures, which showed growth in borrowing had decelerated from £1 billion in October to £880 million in November. The slowdown was largely confined to credit cards, suggesting shoppers are moving away from an expensive but convenient way of borrowing. This may be a warning sign on Christmas trading for the high street; although according to the CGA RSM Hospitality Business Tracker, bars and restaurants saw a 2.7% annual rise in the week before Christmas.

A recent poll of economists conducted by the Financial Times newspaper had mixed results for the UK. On the positive side, the majority predicted UK GDP would return to growth in 2025 and outperform France and Germany. Around half said they viewed Britain as a more attractive place to invest in 2025 compared to 2024, versus 37% who said it was less attractive. On the downside, most said they believed the government would have to increase taxes again before the next general election.

This week will see an early indicator on Christmas trading with the British Retail Consortium (BRC) publishing its sales data for December. The November numbers from BRC were disappointing, which creates two possible scenarios. Activity may have rolled over into December, or consumers might have generally turned frugal and opted for a budget Christmas.

Across the Atlantic, US jobs market data will be released on Friday, and we are predicting it will show ongoing momentum in the labour market.

This week’s figures

TUESDAY 7 JANUARY

UK BRC RETAIL SALES MONITOR, y-on-y, December

-3.4% previous
-0.5% forecast

This is a difficult forecast, taking into consideration the poor figures for November. Given recent indicators point to an economic slowdown in Q4, we are predicting a small contraction for December retail sales.

FRIDAY 10 JANUARY

US Non-farm Payrolls, December

227k previous
180k forecast

After a punchy post-election figure in November, we believe jobs growth decelerated in December, albeit to a level which is still strong by historic standards.