Economy struggling to pick up pace

The latest evidence suggests that the economy has maintained a fairly modest pace in Q3. Indeed, the Markit/CIPS all-sector PMI is consistent, on the basis of past form, with quarterly GDP growth of 0.3% or so. Admittedly, the manufacturing sector looks set to have rebounded, following a contraction in Q2. But the construction sector looks set to fall into recession (i.e. two consecutive quarters of negative growth), while the services sector probably maintained a similar sort of pace of growth. Nonetheless, household spending may have re-gained some momentum, with retail sales volumes posting a solid rise in August. And with survey indicators pointing to export and business investment growth picking up pace, we continue to think that the economy could see a slight acceleration over the coming quarters, rather than slow further as some others expect.