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The Bank of England’s Monetary Policy Committee (MPC) is likely to look through the inflationary consequences of the drop in the pound seen since the Brexit vote and focus instead on cushioning the impact on the economy. … How will policymakers respond to …
11th July 2016
The headlines this week have concentrated on the negative impact that Brexit has had on sterling and confidence, as well as the temporary suspension of trading in a number of commercial property funds. But support for the economy appears to be on its way, …
8th July 2016
The fall in the pound since the EU vote has been widely presented as a negative development. Not only is it being seen as a general indicator of Brexit vote fall-out, but many forecasters appear to think it will have a negative impact on the economy. …
While the latest trade figures highlighted the unbalanced nature of the recovery, GfK’s “Brexit special” consumer confidence figures provided some worrying signs that the main engine of growth may be stuttering following the referendum. … Trade (May) …
The relatively calm market reaction to the EU referendum might suggest that there is no urgency for the Monetary Policy Committee (MPC) to deliver additional policy stimulus at its policy meeting on July 14 th . But we think the Committee will recognise …
7th July 2016
The latest data survey data suggest that growth slowed further in the second quarter, ahead of the referendum. Indeed, the Markit/CIPS composite PMI ended June at a level consistent with no quarterly growth in GDP. That being said, the official data have …
The fall in industrial production in May was just a partial reversal of April’s gain, meaning that the sector should provide strong support to overall GDP growth in Q2. But the manufacturing sector’s struggles don’t appear to be over yet. … Industrial …
While the downward pressure on the pound has increased in response to some adverse post-referendum developments, we have long argued that a substantially lower exchange rate would be an important factor helping to limit the economic damage of a vote to …
6th July 2016
The Markit/CIPS services survey was thankfully not as bad as the construction survey released yesterday. But it was not that good either and suggests that the economy struggled to grow much at all in Q2. … Markit/CIPS Report on Services …
5th July 2016
Coming after Governor Carney’s initial statement following the referendum to “take all necessary steps to meet its responsibilities for monetary and financial stability”, Project Reassure continued with the FPC announcing immediate action to support bank …
Although the slide in the trade-weighted sterling index of a little below 10% since the referendum result will give exporters a much-needed boost to their competitiveness, it will also lift the prices of imported materials and finished goods, leaving the …
1st July 2016
It has now been a week since the result of the UK’s referendum on its membership of the EU was announced and the market reaction has been significant, although perhaps less severe than some had expected. That said, within some markets, the picture is more …
While the UK Markit/CIPS manufacturing survey suggests that the manufacturing sector re-gained some vigour in June, it probably won’t be enough to prevent the sector from slipping back into recession in Q2. … Markit/CIPS Report on Manuf. …
While it’s extremely early days yet, developments in the week since the EU referendum have not altered our view that the economic damage will be smaller than others have suggested. … What have we learned since the …
30th June 2016
Today’s Quarterly National Accounts and Balance of Payments data for Q1 highlighted the imbalances in the UK economy which should come under more scrutiny in light of last week’s Brexit vote. … National Accounts & Balance of Payments …
Consumer sentiment remained resilient in the run up to the referendum, suggesting that consumer spending will have prevented the economy from slowing too much in the second quarter. But it will be another month at least before we get an insight into how …
Although May’s household borrowing figures showed that mortgage approvals recovered from April’s 11-month low, there are still signs that the mortgage market is slowing. Meanwhile, pre-referendum uncertainty didn’t dampen unsecured lending growth. … …
29th June 2016
June’s CBI Distributive Trades Survey paints a fairly disappointing picture of the retail sector in the days preceding the EU referendum. However, the survey hasn’t been an especially reliable guide to the sector’s fortunes recently. … CBI …
28th June 2016
While Friday’s largest-ever daily drop in sterling and the significant hit to UK equities following the vote to leave the EU were undoubtedly extremely significant, the overall degree of market distress is not yet at levels seen during the global …
27th June 2016
Given the prolonged period of political and economic uncertainty ahead, it would be surprising if there weren’t at least some adverse impact on consumer confidence and hence on consumer spending as a result of the vote to leave the EU. But there are …
Professor Sir Charles Bean’s recent report on UK statistics suggested that the rise of the “digital economy” is not being adequately captured by the official economic figures. If true, this could go some (but not all) of the way to explaining major …
Following the vote for a Brexit, a considerable amount of uncertainty hangs over the UK, which is likely to weigh on activity in the short term. However, we think that the near-term hit to the economy will be somewhat weaker than some of the more …
24th June 2016
Article 50 of the Treaty on European Union provides a legal route by which the UK can withdraw from the EU. But could the UK bypass Article 50? And what are the chances that the vote to leave could lead to a renegotiation of the UK’s continued membership …
The vote to leave the EU has clearly weakened the near-term outlook for the UK economy. But we still think that the ultimate damage will be smaller than many estimates have suggested. … Brexit won’t destroy the UK …
The wait is finally over. After months of campaigning, TV debates and a torrent of leaflets, the UK public today go to the polls to decide on the country’s future in the European Union. This Update is intended to help clients keep track of the key …
23rd June 2016
The last few opinion polls released before EU referendum voting closes appear to have largely convinced markets that the UK will vote to remain in the EU. … Brexit Watch: Markets expect voters to reject …
Betting and financial markets continue to consider a vote to remain in the EU by far the more likely outcome in tomorrow’s referendum as we await the remaining few opinion polls. … Brexit Watch: All eyes on final flurry of opinion …
22nd June 2016
Betting markets – which have a good track record of forecasting votes – still appear to consider a vote to remain far more likely than a leave vote, even though opinion polls point to a neck-and-neck race. … Brexit Watch: Polls and bookmakers still at …
21st June 2016
It is generally accepted that a vote to leave the EU in this week’s Referendum would have an adverse impact on financial markets, in particular, a drop in the pound. But any movements will crucially depend on what happens in the next few days, and all …
The CBI Industrial Trends Survey for June showed an improvement in manufacturing activity despite the sector facing subdued external demand and the domestic uncertainty caused by the EU referendum. … CBI Industrial Trends Survey …
Adding to the Chancellor’s concerns about the outcome of the EU referendum on Thursday, the public finances don’t appear to be on track to meet the OBR’s forecasts from the March Budget. … Public Finances …
The main culprit for the UK’s huge current account deficit is the recent deterioration in the UK’s investment income balance. While we expect some of this to be cyclical, we doubt that we will see a return to the strong income surpluses seen in the 2000s. …
20th June 2016
The Leave campaign’s earlier momentum appears to have stalled over the weekend as referendum campaigning resumed on Sunday, improving sentiment in both UK and global markets. … Brexit Watch: Markets bounce as Leave loses poll …
While the main talking point in recent days has been “Leave” taking the lead in EU referendum opinion polls, it appears that markets are still far from fully pricing in a Brexit . This suggests that the short-term market reaction following a vote to …
17th June 2016
Brexit fears have started to take their toll in global – as well as UK – markets in the past week as opinion polls showed support for Leave rising less than a week before the EU referendum. In contrast, the latest retail sales data suggest that consumers …
Consumers appear to have shrugged off EU referendum uncertainty which should help prevent GDP growth from slowing much in Q2. And spending should continue to grow at rates around its historical average. Admittedly, austerity is set to bite in coming …
We have written plenty about the economic effects of both a “remain” and “leave” vote, but in reality it is not that clear-cut. In either scenario, whether the vote is won by a small or large margin will have significantly different implications for …
16th June 2016
The MPC today repeated its warnings about the potential adverse effects on the economy of a Brexit , but reiterated that the policy implications of a Brexit would not be clear-cut. Meanwhile, if the UK votes to stay, we still think that a rate rise …
May’s official retail sales figures suggest that EU referendum uncertainty hasn’t held back spending on the high street and that consumers will prevent GDP growth from slowing too much in Q2. … Retail Sales …
Today’s warnings from the “Remain” camp that the Government would ramp up austerity immediately in a post-Brexit emergency Budget do not look very plausible. It is more likely that the Government would support the economy by loosening fiscal policy. … …
15th June 2016
The healthy performance of the labour market provides more evidence that growth has not slowed markedly in Q2 ahead of the looming referendum. … Labour Market Data …
May’s inflation figures showed that price pressures in the economy remain subdued. However, inflation should still gather more pace next year, regardless of which way the EU referendum vote goes next week. … Consumer Prices & Producer Prices …
14th June 2016
Brexit concerns have intensified over the past week, with polls very close, and this was clearly reflected in falling interest rate expectations (and consequently sterling). But despite 10-year gilt yields hitting an all-time low, there’s actually …
10th June 2016
Last week’s fall in gilt yields to a record low probably has more to do with global concerns than a rise in the probability of a Brexit . Once the turmoil surrounding the immediate aftermath of the EU referendum has subsided, we expect gilt yields to …
A key uncertainty following the EU referendum on 23rd June will be the impact of the vote on domestic political factors. If the UK votes to leave, the political situation will have a key bearing on the direction of the UK’s negotiations with the EU. But …
It’s assumed that a rise in inflation this year is “baked in the cake”, with all economists bar one (out of 33 polled by HM Treasury) forecasting a rise in inflation between now and year-end. But with inflation repeatedly undershooting expectations, …
With even overseas central banks citing the EU referendum as a reason not to raise rates this month, the chances of anything from the Bank of England are nil. If the UK votes to stay in the EU, we don’t think that it will be too long before the MPC …
9th June 2016
Despite the narrowing in the UK’s trade deficit in April, net trade still doesn’t appear to be providing any support to the economy. But the prospects for trade look brighter further ahead. … Trade …
It is by no means guaranteed that the MPC would loosen policy after a Brexit vote. But if it did want to give the economy some extra stimulus, an interest rate cut would not be its only option. … How might the MPC loosen policy after a …
8th June 2016
Despite the upbeat tone of April’s industrial production figures, it is far too soon to proclaim that the sector is out of the woods, or shrugging off Brexit uncertainty. … Industrial Production …
