• Growth data released in quarter four surprised to the upside. US labour and consumer demand remained resilient while the worst fears about potential European gas shortages have abated more recently.
• However, high inflation and rising interest rates increasingly weigh on the outlook for consumers and businesses. As a result, forward-looking indicators still point to a very challenging economic outlook, with global GDP forecasts revised lower in the fourth quarter.
• December’s manufacturing PMI moved further into contractionary territory as new orders fell sharply. Price measures provided better news, as the rates of input costs and output charges fell to two-year lows. The services sector has generally performed better than the manufacturing sector in the major advanced economies, supported by robust labour markets.
• The MSCI UK Monthly Property Index fell in November, by 5.5%. The extent of recent declines in capital values, which are now 17% below their June peak, has been the primary driver. Capital values have fallen across the three main commercial sectors but were most notable in the industrial sector, where they are down 23% since the end of Year-on year headline CPI inflation fell to 7.1%, 10.7% and 10.1% in the US, UK and eurozone respectively in November. Headline inflation is forecast to come down sharply over the course of the first half of 2023, but central bankers remain concerned about strong wage growth and core inflation.

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