The give and take of Brexit

The uncertainty caused by Brexit is helping some parts of the economy and hindering others, but as a whole the economy isn’t doing too badly. An apparent surge in stockbuilding ahead of the original Brexit day of 29th March boosted the Markit/CIPS manufacturing index to a 13-month high in March. In contrast, by prompting firms to delay spending decisions, the political uncertainty contributed to the services PMI falling to its lowest level since the 2016 referendum. At face value, the two activity surveys suggest that the economy may have stagnated in Q1. But we suspect that sentiment is creeping into the surveys and that they are overstating the boost from stockbuilding and the drag from postponed activity. Nonetheless, the risks to our estimate that GDP rose by 0.3% q/q in Q1 lie on the downside.