The UK economy continues to surprise to the upside. Figures for September showed retail sales grew for the third month running, led by spending on non-food items, heading into the so-called ‘golden quarter’.

‘With peak trading and gifting season approaching, it is encouraging for non-food retailers such as department stores and consumer electronics retailers to see volume increases,’ commented Bogdan Toma, partner at McKinsey & Company.

Meanwhile, house prices continue to rise, as shown by both the latest Halifax and Nationwide surveys and the Rightmove (RMV) asking price index, which rose by twice its long-term average in September with prices supported by increased levels of activity and lower mortgage rates.

Consumer confidence also appears to be improving, with the latest S&P Global sentiment index showing household confidence being lifted by positive income growth and slower inflation.

‘Confidence is being supported first and foremost by the strong labour market, with the survey showing both job security and income from employment improving at some of the fastest rates seen since data were first collected in 2009,’ observed Maryam Baluch, economist at S&P Global Market Intelligence.

‘An easing of inflation worries, combined with expectations of a further lowering of interest rates, has also helped allay worries over the cost of living,’ added Baluch.

Next week, the PMI (purchasing managers’ index) surveys will likely highlight further the gap between the relative strength of the UK and the US on one hand and the weakness of the eurozone on the other, before the focus splits midweek between the UK Budget and the US JOLTS and ADP non-farm employment data, both of which are likely to have an impact on markets.

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