Market Mover - BNP PARIBAS - Investment Services India

a fairly significant change in the estimate of thehousehold savings ratio in recent years. The averagerevision to the savings ratio since 2008 is 1.6pp, withthe savings rate in Q2 2011 at 7.4%.Next year the outlook is for slow nominal incomegrowth, with a continuation of sluggish wage growthand the growth in other sources of income likely tofall back. But with inflation easing, the picture may bebetter for real disposable income than in 2010. Andsince the current savings rate probably reflects ahigher than usual precautionary ‘rainy day’ level ofsavings given economic uncertainty, there is somescope for households to augment their spending bylowering their rate of saving if current economicuncertainty eases.In consequence, there may be some scope for somepositive rates of consumption growth next year,particularly in the second half.For now though the news flow remains weakHowever, there are several bridges to cross betweennow and then, many of them not of the UK’s making.And the near-term outlook remains pretty bleak. Thisweek’s CBI Industrial Trends survey saw a slump innew orders and business optimism, suggestingmanufacturing is contracting. And in the comingweek the first release of UK third quarter GDP islikely to be an estimated 0.4% on the quarter. It couldhave been worse, but the evidence from the surveyssuggests activity was sliding towards the end of thequarter and we agree with MPC member MartinWeale that output is likely to contract in Q4.David Tinsley 27 October 2011Market Mover17www.GlobalMarkets.bnpparibas.com