Week Ahead

CBI says business investment to fall over next year

Bank of England
The Bank of England will deliver its latest verdict on Thursday (pic: Terry Murden)

A measure of Christmas cheer is in the air as markets expect neither the US Federal Reserve nor the Bank of England to raise interest rates this week.

However, the CBI believes the UK set for another year of weak growth next year which will prevent the Bank of England cutting rates in 2024.

Its forecast published today is based on projections that consumer price inflation will not reach the Bank’s 2% target until the third quarter of 2025. It says “sluggish growth is expected to weigh on business investment, which is set to fall by 5% in 2024”. 

Markets think the Fed will leave its headline funds rate unchanged at 5.5% on Wednesday and that the Bank of England will leave the base rate at 5.25% at its meeting on Thursday.

The Bank of England’s monetary policy commitee has indicated rates will remain where they are for some time.

At the Parliament’s Treasury Committee last month, governor Andrew Bailey said the threat of inflation is being underestimated and said the Bank is still focused on concerns over persistent inflation.

However, debate has switched to when central banks will start cutting rates. Robust US job numbers on Friday dashing hopes of an early reduction and most analysts believe late spring to be the earliest time to implement the first cut.

Some believe rates will be down to 4.25% by this time next year and head towards the 2% target in 2025 or 2026. The CBI’s forecast is on the more cautious side of expectations.

Following GDP growth of 0.6% in 2023, it expects 0.8% growth in 2024, picking up to 1.6% in 2025. 

The Scottish economy is expected to keep struggling in 2024, new data shows, adding to the pressure on ministers as they weigh up where to cut public spending in the Holyrood budget next week.

The Royal Bank of Scotland Purchasing Managers’ Index for November showed a third consecutive month of contracting output across the private sector. There was also a warning that the muted outlook meant the downturn could last into next year.

Judith Cruickshank, the chairwoman of the Scotland board at RBS, said: “Businesses across Scotland struggled to raise their activity as waning demand and growing market uncertainty hampered sales in November.

“Moreover, with expectations remaining historically muted, the downturn could continue into the new year.”

There are final results from holiday group Tui on Thursday amid speculation that it might quit the London stock market and move to a sole listing in Frankfurt.

City Diary

Monday 11 December

  • First-half results from Begbies Traynor

Tuesday 12 December

  • Full-year results from Chemring and RWS
  • UK unemployment and wage growth
  • US inflation

Wednesday 13 December

  • UK construction, manufacturing and industrial output

Thursday 14 December

  • Trading statements from Balfour Beatty, Capita, Serco and SThree
  • First-half results from Currys
  • Interest rate decision from the Bank of England and European Central Bank
  • US retail sales
  • US weekly initial unemployment claims

Friday 15 December

  • UK GfK consumer confidence
  • Flash purchasing managers’ indices (PMIs) for manufacturing and services industries from the UK, Europe and USA
  • Chinese industrial production, retail sales and tangible fixed asset investment growth figures
  • US industrial production and capacity utilisation rate

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