We've argued that the key to UK's prospects in 2010 depend on how it fared at the end of 2009.
Did consumers spend more in the Christmas season? If so, did that shopping splurge come at the expense of spending in the New Year?
A stronger December 2009, therefore, could signal a weak start to 2010 and the recovery.
Well, the good profit results from the high street retailers was a strong sign of a healthy Chistmas.
Today, data on the public finances suggests the government got a big boost in VAT receipts - a sure sign that spending jumped in December 2009. As Barclays Capital write:
"On the revenue side, central government receipts were 1% y/y higher in December, well off the low of -22.3% y/y seen in March 2009 but still substantially below the growth of close to 4% that was typically seen prior to the financial crisis. Income tax receipts remain weak, down 8.4% y/y, but VAT receipts have recovered somewhat, rising by 4.4% y/y (the strongest growth since September 2008), giving further credence to the view that pre-Christmas spending was firm."
Next Tuesday we get the Q4 GDP numbers. My guess is that strong q4 growth (anything above 0.6% q-q) is likely to be a bad sign for the recovery. Weaker growth is likely to be a good thing.
Like any good economist, we're expecting 0.6% - so on the one hand...and on the other...