There is still little sign of a change of direction in the inflation data. Core PCE in October came in at 0 per cent month-on-month at an annualised rate and 0.9 per cent year-on-year.
As the overall level of growth in the UK continues to be robust – at 0.8 per cent in the third quarter – the detail of the figures just published will keep everyone guessing about the sustainability of that growth. Good news and bad news are evenly balanced and the economy is far from set fair or obviously a basket case. That is why the mushy middle prevails on the Monetary Policy Committee
- Market sector output. Real market sector output grew by 1 per cent in the third quarter, indicating robust demand. It has expanded 3.4 per cent in the year to the third quarter, indicating that the willingness to pay for additional goods and services has been strong since late 2009 and the private sector has been in good shape. This bodes well for the consolidation ahead. (Market sector output represents goods and services produced and sold in markets at meaningful prices. Most private sector activity and public sector stuff such as planning fees are included. Direct provision of free-at-the-point-of-use health and education services are excluded.)
- Broad based output gains. In the third quarter, services accounted for half the 0.8 per cent GDP rise, construction a quarter, and production the rest. The expansion was not dominated by one sector, even if construction gains were disproportionate to their size in the economy.
- A welcome boost from net trade. When looking at the expenditure contributions to growth, net trade (exports and imports) contributed 0.4 percentage points of the growth, indicating that the trade account is finally helping drive prosperity rather than detracting from it. Both imports and exports grew faster than GDP, but exports grew much faster.
The European Central Bank governing council goes into “purdah” on Thursday ahead of next week’s interest rate setting meeting. So Yves Mersch, Luxembourg’s central bank governor, has seized a last chance to sway the debate.
Action to stabilise Ireland’s banks “will allow us to continue on our gradual and prudent exit strategy,” he told CNBC on Wednesday. “I would not take issue with the expectations that are presently in the market.”
That suggested at least Mr Mersch favoured another step to restrict the liquidity the ECB is pumping into the eurozone financial system.