The week ahead 27 November 2023 - National Insurance cut but tax burden rises
What to watch out for in the UK economy and property market this week.
Last week saw the Chancellor of the Exchequer cut National Insurance from 12% to 10%, and this will apply from 6th January 2024 – normally Autumn Statement measures are scheduled for the following April. However, there was an element of the Chancellor giving with one hand and taking with the other, as the current freeze on the tax bands means that the overall tax burden on workers is rising. The government also made permanent ‘full-expensing’, which allows investment in machinery and equipment to be offset against Corporation Tax and had been due to expire in 2026. There were also welcome investments in the industries of the future, such as scientific R&D, artificial intelligence and green manufacturing. Our full analysis of the Autumn Statement can be found here.
The economy also saw some optimistic news last week, as the UK PMI figures came in stronger than expected. The convention of the index is that a reading over the 50 mark points to growth for the private sector side of the economy, and November came in at 50.1, up from 48.7 in October. Forecasters had expected no change. This was mostly thanks to the Services sector returning to growth, as manufacturing at 46.7 remains below the pivotal 50 level. Also, the UK consumer confidence figures beat expectations, with a reading of -24 compared to a forecast of -28. This continues a trend this year of data coming in better than expected, but nevertheless pointing to slow growth. The overall message appears to be that the economy is coping better with the rise in interest rates than was expected, which bodes well for a recovery for property markets in 2024 – possibly starting in the spring for some sectors.
This week sees data released on the UK housing market, namely mortgage approvals and the Nationwide House Price Index. Mortgage rates have declined in recent months but remain high by the standards of the last decade. Moreover, the economy is slowing and household incomes are under pressure. Consequently, we are expecting downbeat readings for both indicators.
Things to watch for this week
Wednesday, November 29th
Eurozone Economic Sentiment, November
Previous: 93.3
Forecast: 94.0
Sentiment among firms on the economy has declined for six consecutive months, however we believe November may have seen an improvement thanks to talk that interest rates may have reached a peak.
UK Mortgage Approvals, October
Previous: 43.3k
Forecast: 42.1k
Mortgage approvals have been falling in recent months in the face of high interest rates and evidence that prices are falling. We are forecasting another decline for October for the same reasons.
Thursday, November 30th
Eurozone Inflation, November
Previous: 2.9%
Forecast: 2.8%
Inflation has been broadly trending downwards for some time now, and we believe another decline will be reported for November.
Nationwide UK House Price Index, y-on-y, November
Previous: -3.3%
Forecast: -4.0%
The index has fallen for nine months in a row on an annual comparison, and given that interest rates remain high and the economy is slowing, we are predicting another negative figure.
