Recovery’s wheels not falling off, despite Q3 slowdown

The latest business surveys made for dismal reading. Indeed, the average level of the economy-wide Markit/CIPS composite PMI over Q3 as a whole points to quarterly growth in GDP of just 0.5%, following Q2’s 0.7% expansion. However, we doubt that this is the start of a more pronounced slowdown in the pace of the economic recovery. In fact, there are plenty of reasons to think that the recovery should be gaining momentum. Consumer and business confidence remain at historically high levels, survey measures of firms’ investment intentions remain upbeat, unemployment is low and falling, wage growth is picking up and households are receiving a significant boost to their spending power from low energy and food prices. Accordingly, we remain confident that Q3’s slowdown will prove to be a temporary blip and that the economic recovery will regain pace soon.