Economic recovery picks up pace at the start of Q4

The latest business surveys support our view that the slowdown in the economy in Q3 was just temporary. Gains in both the Markit/CIPS manufacturing and service sector PMIs in October left the economy-wide composite PMI looking consistent with quarterly growth in GDP of 0.6%, following Q3’s moderation to 0.5%. (See Chart.) Admittedly, it is still early on in the quarter. But we expect tosee this improvement in activity continue in the coming months, particularly as consumer confidence remains at historically-high levels, unemployment is low and falling and households are continuing to receive a significant boost to their spending power from falls in energy and food prices.