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“Christmas has come early” for chancellor Rachel Reeves with borrowing undershooting expectations in November (see earlier post).

So says Ruth Gregory, deputy chief UK economist at City consultancy Capital Economics, who told clients:

Not only was borrowing (on the PSNB ex banks measure) of £11.2bn well below the consensus forecast of £13.0bn, but it was £3.4bn lower than in November 2023 and the lowest November borrowing in three years.

The breakdown revealed that £2.4bn higher spending on public sector pay left total current expenditure in the year-to-date £17.7bn higher than at the same stage last year. But due to the recent strength in wage growth and fixed personal tax thresholds, total tax receipts were £3.2bn higher than in November 2023.

“The UK consumer appears to be limping towards the finish line in 2024 - retail sales volumes came in slightly below expectations in November, with a good performance from food the only real highlight.

Online sales were weak across the board and there was little Christmas cheer on offer for clothing retailers. The 2.6% decline in clothing sales in November means clothing sales volumes are at their lowest in almost three years. With clothing often the first category consumers cut back on in difficult times, this is not a good omen.