UK vacancies rise consistent with solid GDP
Simon Ward
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The preliminary fourth-quarter GDP estimate published on Tuesday will be an important influence on near-term MPC decision-making. The surprise fall in third-quarter GDP (of 0.4% according to the preliminary estimate, subsequently revised to 0.2%) was probably the swing factor in the November decision to expand asset purchases by a further £25 billion.
Available output evidence is consistent with a GDP rise of 0.4-0.5% last quarter. A weighted average of industrial and services production was 0.25% above its third-quarter level in October. Industrial output rose a further 0.4% in November, while business surveys suggest that services activity strengthened into quarter-end.
Labour market trends hint at an upside surprise. The chart shows a scatter plot of quarterly changes in GDP (vertical axis) and job vacancies (horizontal). The rise in vacancies last quarter was the largest since the third quarter of 2007 and – based on the estimated trendline – is consistent with a GDP increase of 0.85% (red square on line).
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