Economic Review November 2024

Interested in keeping up to date with the latest economic performance information impacting businesses and households in the UK? This month’s economic review focuses on the developments that arose in November 2024. Keep reading for more information.

A more gradual decline in interest rates is anticipated

The Bank of England (BoE) lowered interest rates last month for just the second time since 2020, but it cautioned that future cuts would probably be more gradual because of the possibility of inflation rising next year.

The BoE’s nine-member Monetary Policy Committee (MPC) voted by an 8-1 majority to lower rates by 0.25 percentage points at its most recent meeting, which ended on November 6. As a result, the bank rate dropped to 4.75%.

BoE Governor Andrew Bailey said in a statement following the news announcement that rates will probably “continue to fall gradually from here,” although he did issue a warning that they wouldn’t be lowered “too quickly or by too much.” Mr. Bailey also made a point of highlighting the phrase “gradual,” adding that “there are a lot of risks out there in the world at large and also domestically” as the rationale for such an approach.

The Governor also released the BoE’s most recent economic estimate, which incorporates the Chancellor’s Budget measures, in conjunction with the rate announcement. According to the updated predictions, the initiatives outlined in the Budget are expected to delay the return of inflation to the Bank’s goal level of 2% by one year and increase the headline rate of inflation by over half a percentage point at its peak in just over two years.

Two weeks following the MPC announcement, the Office for National Statistics (ONS) released the most recent inflation data, which showed that the annual headline rate increased from 1.7% in September to 2.3% in October. Although the October increase in energy prices was a major factor in this steep rise, the number did came in marginally higher than analysts had predicted. The Governor’s remarks and this overshoot have surely raised the likelihood that interest rates will stay the same after the MPC’s year-end meeting on December 19.

The UK economy is stalling

The economy barely expanded between July and September, according to the ONS’s gross domestic product (GDP) figures released last month. However, more recent survey data indicates that the economy is losing speed.

According to the most recent GDP data, the UK’s economic output increased by a meagre 0.1% during the third quarter. This number reflects a significant deceleration from the 0.5% growth rate reported during the second quarter of the year and was lower than experts had predicted.

The economy really shrank by 0.1% in September alone, according to a monthly analysis of the data. The ONS reported a sharp decline in manufacturing output while the services sector stagnated. Many economists attributed September’s weakness to budget uncertainty, which they believed affected how families and businesses behaved.

Additionally, data from a newly published economic poll indicates that company optimism declined further in the weeks after the October Budget. In fact, for the first time in 13 months, the S&P Global/CIPS UK Purchasing Managers’ Index (PMI) flash headline growth indicator dropped below the 50 mark, indicating a decrease in private sector output, from 51.8 in October to 49.9 in November.

“It is depressing to read the first survey on the state of the economy following the Budget,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence. Even though it is very little, the output decline contrasts sharply with the strong growth rates observed over the summer and is followed by growing anxiety about the year’s prospects.

The BoE also released updated forecasts for economic growth last month. The Bank is now projecting a stronger 2025, with next year’s expected growth figure increased to 1.5% from a previous projection of 1.0%, even though it did reduce this year’s forecast from 1.25% to 1.0%.

Markets (TOMD-compiled data)

Investors kept a tight eye on the ongoing political unrest in France and the prospect of potential US tariffs at the end of November. The FTSE 100 was flat on the final trading day of the month, but European markets ended the day little higher as inflation projections were in line with predictions. On the other side of the Atlantic, US equities moderated from their all-time highs earlier in the week.

The FTSE 250 index ended November 1.88% higher at 20,771.57, while the FTSE 100 index ended the month at 8,287.30, up 2.18%. The FTSE AIM ended the month at 732.49, down 0.63%. At 4,804.40 at the end of November, the Euro Stoxx 50 was down 0.48%. The Nikkei 225 in Japan ended the month at 38,208.03, a 2.23% monthly loss.

With worries that his plans would spread to other areas, US President-elect Donald Trump has laid out intentions to impose tariffs on goods from China, Canada, and Mexico. The tech-focused NASDAQ ended November up 6.21% on 19,218.17, while the Dow Jones ended the month up 7.54% on 44,910.65.

The euro ended the month at €1.20 versus pound on the foreign currency market. The US dollar ended the day at $1.05 versus the euro and $1.26 versus sterling.

November saw a 5.40% decline in Brent crude prices, closing at about $68 per barrel. As OPEC+’s production plans were the subject of increased speculation ahead of their December meeting, oil prices fluctuated at the end of the month. With a monthly loss of 1.84%, gold ended the month trading at about $2,683 per troy ounce.

The unemployment rate increases

Although the ONS has cautioned that the statistics should be interpreted cautiously because of the increased volatility of smaller survey sample sizes, official figures released last month showed an increase in the jobless rate.

According to the most recent ONS labour market report, the unemployment rate was 4.3% from July to September 2024, down from 4.0% during the preceding three months. In the three months leading up to September, the number of payrolled employees fell by 9,000, according to the data, and preliminary projections indicate that the number fell by a further 5,000 in October.

Additionally, there were 35,000 fewer job openings during the August–October period than during the preceding three months. Overall, the most recent set of data indicates a “continued easing of the labour market,” according to the statistics office.

The Resolution Foundation published a study last month that brought attention to the existing issues with data dependability, and ONS is currently working to update the statistical technique used to determine its labour market estimates. The think tank’s research of tax office, self-employment, and new population data suggests that up to a million people who are thought to be employed are now not included in the official numbers.

The decline in retail sales is more than anticipated

In addition to more recent poll data suggesting “disappointing” sales in November, the most recent official retail sales figures revealed a fall in sales volumes ahead of the October budget.

Following a period of expansion over the preceding three months, retail sales volumes declined by 0.7% in October, according to figures issued by ONS last month. Although analysts had anticipated a reduction in sales, October’s drop was more significant than anticipated. Although the ONS stated that a “notably poor month for clothing stores” was the main cause of the decline, it also pointed out that businesses everywhere reported that customers were delaying purchases until after the budget.

However, the retail industry does have some hope thanks to data from GfK’s most recent consumer confidence index, which shows a decrease in pessimism following the Budget. With rise observed in all five survey components, the headline figure for November reached its highest level since August, indicating that consumers may be more willing to spend in the lead-up to Christmas.

However, retailers anticipate that market conditions will continue to be difficult, according to the CBI Distributive Trades Survey conducted in November. Although there has been “some improvement” in the retail climate since the middle of the year, the poll also noted “disappointing sales” in November and predicted that volumes will continue to fall short of seasonal averages in December.

All details are correct at the time of writing. It is important to take professional advice before making any decision relating to your personal finances. Information within this article can be subject to change without notice, and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK.

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