US surge
Q3 surprise
The US economic rebound appears to be gathering pace. Revised figures for third-quarter GDP growth showed expansion of 3.9 per cent on an annualised basis, up from initial estimates of 3.5 per cent and overshadowing consensus forecasts which had pointed to a marginal downwards revision. One of the key supports for the recovery is an improvement in consumer spending, still the mainstay of the US economy - it rose by 2.2 per cent in the quarter although a surprise dip in consumer confidence was recorded for October. Meanwhile, a dip in US house price growth in September has raised hopes of an uplift in home sales.
Housing moderation
Prices still up
The UK housing market is likely to continue cooling during the next 12 months according to research by mortgage lender Halifax but will continue to grow at a more sustainable pace through the year. Halifax said there will be "a further moderation" in house price growth next year with average prices likely to end up rising between 3 and 5 per cent, compared with this year's double-digit surge with a continued disparity between regions although London is unlikely to be the driver of growth. Meanwhile, mortgage lending figures from Halifax's peer Nationwide showed a fall of more than one third in mortgage lending to £3.6bn for the six months to September.
Russia freezes
Economy hit
A combination of the falling oil price and ongoing economic sanctions against the Russian regime and its supporters are heralding a freeze in the country's economy. The relentless fall in the oil price over the past five months, which OPEC may attempt to stem this week, is hurting the Russian economy more than most others at a time when economic sanctions are also biting. Finance minister Anton Siluanov this week said Russia was losing a combined $140bn (£88.97bn) a year from the pincer movement with oil accounting for around two thirds of the total. Russia's budget for next year has been set with an assumed oil price of $96 a barrel. The knock on effect is being felt in the west too, with German exports to Russia down 16.6 per cent in the opening eight months of the year.
Budget bane
Deficit danger
The chancellor George Osborne is faced with a struggle to find a way of presenting deficit figures for next week's autumn statement in a positive light. Although the most recent monthly deficit figure for October of £7.7bn came in below both last year's figure and analyst expectations the cumulative figure for the year to date of £64.1bn is £3.7bn ahead of last year. This has fed doubts that the chancellor can perform a juggling act sufficient to reduce the deficit for the full year, thus leaving him faced with the threat of overshooting deficit targets just weeks before the general election. Furthermore, it leaves the wriggle room for vote-winning tax cuts looking uncomfortably tight.
UK OK
Through 2016
The chancellor does have some good news to impart next week. The UK's economic recovery looks entrenched and should stretch right through next year and into 2016 according to the Organisation for Economic Co-operation and Development. Citing continued high job creation and continuing private consumption, the OECD reiterated its forecast for 3 per cent growth in the UK this year and nailed its colours to the mast with predictions of 2.7 per cent growth next year and 2.5 per cent in 2016. Third-quarter growth has been confirmed at 0.7 per cent, driven primarily by private consumption and government spending. Meanwhile, the UK's services sector grew by 0.5 per cent month-on-month in September.
Equity returns
Back in favour
After an iffy couple of months, equities returned to favour with UK investors in October despite the volatility in global indices during the month. The latest statistics from the Investment Management Association showed net retail sales rose to £2bn having slumped to £728m in September with equity asset classes accounting for almost half of all net retail sales. The desire for income remains clear with equity income funds the best selling sector for the fifth straight month with net retail sales of £729m.
