Economic Highlights

Money Supply and Credit data for October showed that some areas of the economy were already decelerating prior to the latest countrywide lockdown. Overall consumer credit fell £0.6bn during the month (f/c flat), and is now down 5.6% in aggregate y/y. The “glass half full” interpretation of this is that it leaves plenty of savings to unleash pent-up demand once normality returns. Pessimists will point to reports of wider financial stress. The housing market remains buoyed by the temporary stamp duty cut, with Mortgage Approvals rising to 97,091 in October from 92,901 in September.

The Housing market continues to be a source of strength for the US economy too. October saw sales of 999k New Homes, above expectations of 975k. Historically low mortgage rates provide a strong tailwind. The 30-year rate is just 2.9%, down from 4.8% a year ago. The minutes from the last FOMC meeting suggest that the Fed could extend the maturity of its asset purchases in December, thus helping to flatten the yield curve.

Industrial Profits growth of 29.2% y/y in October (vs 10.1% in September) provide evidence of the rude health of China’s economy. The latest PMI data confirms that view. The November Manufacturing PMI rose from 52.1 to 51.4, with Non-Manufacturing (Services and Construction) up from 56.2 to 56.4.