The optimism here about UK growth prospects for 2013, based on faster real money supply expansion during 2012, is supported by encouraging February surveys of services and retailing. The new business index of the services purchasing managers’ survey reached a nine-month high, while British Retail Consortium members reported annual sales growth of 4.4% – the best since April 2011 (artificially boosted by Easter timings).
The pick-up in these sectors increases the probability of an expansion of GDP in the current quarter and should quell tiresome “triple-dip” talk*. Weaker February purchasing managers’ survey results for manufacturing and construction appear partly to reflect temporary disruption due to bad weather. As noted in a post last week, a rebound in construction orders during the second half of 2012 suggests that the sector will contribute to growth during the first half – orders are a more reliable guide to future output than the construction PMI.
Incorporating the PMI results, the “MPC-ometer” model followed here – which predicted that several members would vote for additional stimulus at the February meeting – continues to suggest a “hold” decision this week.
In other UK news today, the Office for National Statistics reported that the value of mergers and acquisitions involving a UK target in the fourth quarter of 2012 was the lowest since the second quarter of 2009. M&A activity, however, has picked up in early 2013, with Bloomberg reporting deals worth £38.8 billion so far versus £33.7 billion in the fourth quarter. Surging corporate liquidity – see previous post – suggests a further rise.
*As previously discussed, the onshore economy has yet to suffer a double-dip and, adjusted for the Olympics boost, expanded in both the third and fourth quarters of 2012.