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Here we look at the leading indicators in the world of economics.

for in-depth analysis into commodities, trade, equities and more with a focus on Europe.

Shifting Corporate Sentiment?

Odds of a soft landing for the UK economy have increased, as recent PMI data signals ongoing growth, despite a slight cooling in output across both the manufacturing and services sectors. Meanwhile, corporate appetite for borrowing appears to be shifting. Net lending to UK commercial real estate rose sharply to £1.3 billion in August 2024, up from £525 million in July, matching June’s high and marking its highest level this year. More generally, UK firms raised net external finance by £6.2bn m/m in August, primarily driven by increased bank borrowing and bond issuance. The y/y growth in borrowing by large businesses rose to +2.9% in August, up from +1.7% in July, the strongest since May 2023. With further interest rate cuts expected in the coming months, the environment for CRE lending and investment appears increasingly positive. Most economists expect a quarter-point rate cut at November’s monetary policy meeting, bringing rates down to 4.75%.

Conference Season

Last week, the Labour Party held its first conference in government in over a decade, during which Sir Keir Starmer presented his vision for ‘national renewalâ€�. Starmer acknowledged that achieving Labour's key objectives - economic recovery, improvements in public services and enhanced infrastructure - would require making ‘tough, long-term decisionsâ€�. Since taking office in early July, both Starmer and Chancellor Rachel Reeves have repeatedly highlighted the grim state of the UK’s public finances, which face a reported £22 billion deficit.

Despite this, Labour seems to be positioning for increased public investment ahead of the upcoming Autumn budget, aligning with its borrowing to invest approach � a move that is hoped will boost the economy’s long-term growth prospects. The party reaffirmed its commitment to building 1.5 million homes within five years and reforming planning laws to stimulate construction. Healthcare was a key focus, with Labour pledging to revitalise the NHS. Additionally, Labour reiterated its dedication to a green energy transformation, promising to establish a ‘clean power system� by 2030.

Where will debt costs bite hardest?

What impact is the current level of interest rates having on businesses? According to the latest ONS BIC survey of c. 10,000 UK companies, 35% reported having no debt obligations. Of the rest, however, 35% had a high level of confidence when it came to meeting their debt obligations, up from 24% a year ago. Interestingly, respondents from the fast-growing human health & social work, construction, and professional scientific & tech sectors were more positive about meeting their debt obligations, compared to the wider economy.

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