If the latest indicators are any guide, the UK economy is picking up nicely, and is set to hit the dizzying heights of average during the last few weeks of 2016.
We now have the full set of purchasing managers indexes, or PMIs, for November. Collectively, they picked up nicely, with the star performer, the services PMI, rising to its highest level since January. What is especially impressive about the showing is that it was average, broadly equalling the long run average. Collectively, the three indexes point to 0.5% growth so far in Q4, which sugests that the UK economy has shifted up a gear, enjoying a performance that can be described by such hyperbolic words as 'okay'.
To tell the full story, with PMIs, the key number is 50. Anything below is meant to signify contraction, above growth. And in the UK, Markit and CIPS work together and give a PMI for manufacturing, another for construction and a third for services.
After the Brexit vote all three fell below 50. They have all well and truly recovered.
The PMI for manufacturing did in fact fall in November, dropping from 54.2 to 53.4. But that was alright, after-all the index covering the previous month hit a 27 month high, and the November drop was small.
The PMI for construction rose, from 52.6 to 52.8. That was something of a so-so performance, consistent with growth, but nothing special.
The Business Activity Index tracking services rose from 54.5 to 55.2, a ten month high. "The rate of growth was broadly in line with the 20- year long-run survey average," said Markit in barely concealed excitement.
There is a worry looming, although it is not looming by much. This is how Markit put it: "Input price inflation remained sharp in November despite easing for the first time since May, and a similar trend was evident for prices charged by service providers. Companies widely attributed inflationary pressures to the weak sterling exchange rate driving up import costs such as food, higher fuel prices, international travel (again linked to exchange rates) and rising labour costs."
So that's the downside. The fall in sterling is helping exporters, but resulting inflation will hit consumers.
On the other hand, sterling has risen sharply in recent weeks, which will probably act in much the same way as a double-edged sword. Slash, the benefits to exporters will be less, slice the cut in real wage growth will not be as significant as was feared.
Ruth Gregory, UK Economist at Capital Economics said: "We don’t think that the rise in inflation will be too stark by past standards and supportive policy should ensure that any slowdown is not too severe. As such, we continue to think that GDP growth will only ease from around 2.0% this year to about 1.5% in 2017."
