Ticking over

Living standards and house building made up 2 of the 6 milestones announced by the UK Government last week. There was also a regional dimension, with the aim being for the fruits of economic growth to be felt in every part of the UK. Timely then that we’ll publish the next Regional Growth Tracker this week, looking at what businesses are telling us about growth across the regions. Outside the UK,?both the Eurozone and US labour markets remain resilient with unemployment rates continuing to be low by historical standards and the OECD expects inflation to continue to retreat, despite economic hurdles and geopolitical tensions.

?

Check out a glossary of key terms here.

?

What’s the latest in the UK?

?

Moving the dial. What gets measured, gets managed. At least that's the aim of the Government's milestones, announced last week. Economic growth is one of them, specifically that real disposable income per head should be higher by the end of the parliament and that should be the case across the country. This is designed to be closer to how people experience the benefits of growth, rather than an abstract notion like GDP. But beware misleading titles. "Disposable" in this statistical definition means after taxes and benefits are taken into account, but before many costs that most people don't think are discretionary, like housing, food and utility bills. That's especially relevant now with private sector rents rocketing up at over 8%, consuming much of the gains from above-inflation wage growth. Read more here.

?

Halifax reports a 1.3% monthly and 4.8% annual house price increase. November marks the fifth consecutive monthly increase and the biggest one so far this year. The average property value reached a record ￡298,083. Regional dynamics reveal nuanced growth, with Northern Ireland leading at 6.8% annually and Scotland recording a more modest 2.8% growth. Underlying momentum stems from improving mortgage demand and anticipated interest rate reductions. However, affordability challenges persist. Transaction volumes show promise, with HMRC data indicating a 9.5% monthly increase in home sales in October and a robust 21% year-over-year rise, suggesting cautious optimism in the property sector. Read more here.

?

Profits, prices and payrolls all set to be hit by the looming rise in National Insurance contributions.?A degree of margin compression seems all but inevitable in 2025, as 59% of CFOs surveyed reveal they expect the Autumn Budget decision to increase employer National Insurance contributions to squeeze profitability. Nearly as many business leaders, 54%, plan to pass-on costs by hiking prices – adding to inflationary momentum. An equal share, 54%, expects to reduce staff headcount, though fewer (38%) expect staff to shoulder the burden in the form of lower wages, despite expecting pay to rise 4% over the coming year. Read more here.

?

Late Black Friday distorts retail sales. UK BRC retail sales fell sharply in November, reporting a 3.3% year-over-year contraction, down from 0.6% growth in October. This was primarily influenced by Black Friday falling into the December reporting month this year. Even so, rising energy prices and low consumer confidence are clearly weighing on non-food spending, clothing being a particularly weak performer. Looking ahead, the Retail sector will be hoping that seasonal spending is just delayed not diminished. Improving consumer confidence, surging house prices, continued real income gains, and impending further rate cuts all point to retail sales gradually picking up over the coming months. Read more here.

?

The construction industry seemingly shrugged off worries related to the Budget. The headline PMI index for the construction industry rose to 55.2 in November following a dip to 54.3 in October, driven largely by improving demand for commercial work. Civil engineering also continued to be a strong performer, whilst housebuilding remained the weakest performing category and signalled an accelerating pace of decline. The survey indicates that inflationary pressures persist as input prices rose at the fastest pace in 18 months. In the face of rising employment costs, it is perhaps not surprising that the rate of job creation eased to a three-month low. Optimism for the year ahead remained upbeat but fell sharply from October due to worries about the UK economic outlook as well as rising employment costs. Read more here.

?

Stress-testing the UK financial system. Speaking to the results of the Bank of England’s System-Wide Exploratory Stress (SWES) exercise, which ?offers insight into resilience of core UK financial market, Lee Foulger, Director of Financial Stability, highlighted that market participants can unintentionally escalate financial stress through individual risk management actions.? Key findings highlight the fragility of non-bank financial institutions during stress, with participants often misunderstanding their own liquidity constraints and market dynamics. The exercise underscored the importance of collaborative regulatory approaches and the need for continuous monitoring of financial system vulnerabilities, offering unprecedented insights into potential systemic risks.?Read more?here.

?

?

What’s the latest in the Eurozone?

?

The Eurozone’s unemployment rate remains resilient. In October, the EZ unemployment rate held steady at 6.3%, the lowest on record, a slight improvement from 6.6% a year ago. This stability reflects a robust job market despite some rising challenges, including youth unemployment, which increased to 15.0%. However, recent PMI data paints a more concerning picture for economic growth. The composite PMI dropped to a ten-month low of 48.3 in November, signalling weak demand across all sectors. Looking ahead, while unemployment figures appear stable, the declining PMIs raise alarms regarding potential stagnation in the economy. Read more here and here.

?

?

What’s the latest in US?

?

The US labour market bounces back. US payrolls rose strongly in November, rebounding from October’s strike and hurricane-battered low. 227k jobs were added during the month, close to the 220k expected. It wasn’t enough to prevent the unemployment rate ticking up to 4.2% from 4.1%, but it’s still firmly low. Most sectors improved with health care and social assistance again leading the way. Unusually, retail trade continued to shed jobs (it usually rises at this time of year). Adjusting for a volatile couple of months, the trend is softer, with the six-month run rate at 143k, having been 100k higher back in the spring. And even that 143k may be considerably overstated according to separate data. President-elect Trump will deliver plenty to discuss through 2025, but the health of US labour market will be as closely watched as ever. Read more here.

?

?

What’s the latest in the Global Economy?

?

Global growth steady amid persistent challenges. The OECD projects global GDP growth of 3.3% in both 2025 and 2026, reflecting steady resilience despite significant economic hurdles. Inflation is expected to decline from 5.4% in 2024 to 3.0% in 2026, approaching central bank targets as tighter monetary policies take effect. Labour shortages, weak consumer confidence, and high public debt continue to constrain growth. Key risks include geopolitical tensions and financial instability. The OECD underscores the importance of structural reforms to address workforce challenges and public debt, along with cautious monetary easing, to keep inflation in check and support economic stability. Read more here.