The view here that the UK economy is strengthening in lagged response to faster real money expansion receives support from labour market statistics released today, showing a surprisingly large drop in claimant-count unemployment along with a further rise in vacancies. A GDP trend indicator based on claimant-count changes continues to climb solidly – see first chart. (The indicator rises if the monthly change in unemployment is below a fixed level.)
Further indirect evidence of economic improvement is a January rebound in the equity analysts’ revisions ratio – the net proportion of company earnings estimates raised over the last month. This ratio correlates with business survey activity indicators, including purchasing managers’ new orders indices, which could strengthen significantly this month – second chart. (The indicator shown is a weighted average of the manufacturing new orders and services new business indices.)
