From Forecasts + Regional Feedback from Small/Medium/ Large Businesses across all sectors
Headlines – Base Rate
5.25% - “Expected to be Peak, but lots of uncertainty”
Market expectations re. Base – “Table mountain – flat-lining moving forward, duration uncertain, i.e. how long this will last.”
Cannot rule out another rise – but “close to if not peaking currently.”
“No magic number” for what new normal of base rate will look like
Average base rate since the bank of England founded in 1694 = 5%
Headlines – Inflation
Projected to fall further – but still well above 2% target
This morning figure = 6.70% [unchanged from last month]
“We expect” inflation to be around 5% by the end of 2023
Why coming down? Easing energy/food/fuel – but again still volatile/ uncertain
Labour market shortages – fuelling wage growth [thus contributing to inflation]
Headlines – UK Economic growth
“Slow but positive in the near term”
Overall – still largely flat
Normal annual economic growth = 2/3%
Business feedback is slightly downbeat – due to higher rates/ cost of borrowing.
Still Risk – of ‘mild recession,’ i.e. two consecutive quarters of negative growth
Pay growth – continues to rise, but indicators suggest this will slow.
Headlines – UK Housing market
Broad consensus = “ Higher rates have depressed the housing markets” – the main driver
Mortgage transactions – 25% lower than normal
Expect subdued activity until Spring 2024
Housebuilders – discounting to keep share prices afloat etc on FTSE
Key Indicators for MPC Decisions
Services inflation – as linked to wage growth – needs to come down!
Labour market data – high % of Inactive during and post covid – improving but still needs to go further.
Summary /final remarks
UK Economy – “overall resilient” – picture not as bleak as 12 months ago
But – this December/ Jan – approx. 500,000 fixed rate mortgages due to expire
Payments increase – will impact consumer spending
New data – published in November
Contact Kyran Roberts - 02922 710970
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