Good news from today’s economic data
On the whole, today’s main economic figures are positive. Firstly, the figures for UK output, income and expenditure confirmed last month’s first estimate for GDP in the third quarter: GDP rose by 0.8 per cent from the previous quarter, 2.8 per cent from the third quarter of 2009.
It is still reasonable to worry about the extent to which this growth depends upon a massive surge in construction that is unlikely to be sustained. But there has also been good progress in business services and finance (which accounts for about three quarters of the economy) and, best of all, strong growth in manufacturing. Overall, last month’s figures were good news and today’s confirmation is welcome – it makes it much less likely that next month’s GDP data will disappoint.
Today’s Index of Services data may show a slight reduction in the annual rate of growth, but on balance the news here is good as well. The Index was up 0.6 from last month and it has now been rising since February. The year-on-year increase – 2.5 points – was slightly down from last month (2.6) but I’d pay more attention to the fact that this is the second successive month with where that figure is over 2 points.
The figures for Business Investment are more discouraging, down 0.2 per cent compared with the second quarter (though still up 4.6 per cent on the third quarter of 2009.) Private sector non-manufacturing business investment was actually up by 0.6 per cent from the second quarter, but the overall decline resulted from large fall in manufacturing investment of 2 per cent. There is a big year-on-year fall in investment in new building (down 16.2per cent) which suggests that the construction boom is not going to be maintained.
The British Bankers’ Association’s monthly figures show the lowest level of mortgage loans for 19 months. The number of new mortgages for house purchase fell for the fifth month in a row (though it is still higher than during the recession) and gross lending, net lending and the value of approvals are all well down on pre-recession levels:
(Source for chart: High Street Banking Statistics, BBA, 24 November, p. 1)
The BBA’s statistics director, David Dooks said:
Activity in the mortgage and consumer credit markets continued to be subdued in October, reflecting uncertain prospects for households and lower consumer confidence.
The BBA figures show that net lending to companies, at £10.4 billion, is well down from last month’s £19.3 billion; the BBA comments that credit availability has improved for companies, so this reflects companies’ preference for paying off debt, plus a shift to other sources of finance, such as the equity and bond markets. There continues to be a significant difference between net lending to non-financial companies (-£0.1 bn) and financial companies (+£10.5 bn), which leaves a question mark over the hopes of sustained recovery led by manufacturing. There is no sign here that the public sector deficit is crowding out private business, preventing them accessing finance.