City eyes final economic data before Christmas shut down

Although investors will be readying to get away over the Christmas break, there are a few economic data sets to get through before the City shuts down.

Last week, London’s FTSE 100 index slumped nearly two per cent to close at 7,332.12 points as traders were bombarded by a barrage of global economic news.

FTSE 100 finished lower last week

On Thursday, the Bank of England lifted interest rates for the ninth time in a row with a 50 basis point rise to 3.5 per cent, the highest level since October 2008.

Inflation, GDP and jobs figures also flowed into investors’ inboxes, sparking a more risk-off week of trading.

This week, public finances numbers will top investors’ minds. Government payments to deal with the cost of living crunch and a slowdown in economic activity is likely to have worsened the UK’s fiscal position.

Analysts at Deutsche Bank reckon the government borrowed £19bn in November to bridge the gap between spending and income, among the highest totals for November on record.

Sanjay Raja, senior economist at the investment bank, said a combination of weaker than forecast economic growth hitting tax revenue will result in government borrowing outpacing the Office for Budget Responsibility’s latest projections.

“Markets will be paying close attention to whether that trend continues into winter,” he said.

Raja added UK mortgage approvals are on course to hit their lowest level since the onset of the Covid-19 pandemic, at around 59,000, due to prospective buyers being priced out of the market by higher interest rates and a cost of living squeeze.

Raja was focusing on data out at the turn of the year, although his predictions chime with other analysts who have warned house prices are on track for a sharp correction in 2023.

Lloyds Bank’s business barometer survey on Monday is expected to drop to six points from 10 points, illustrating businesses are concerned about the impact on their finances from the looming recession.

Retail sales figures from the Confederation of British Industry and revisions to third quarter GDP will be the final major economic data sets in 2022.