The US economy is the main engine of global growth, posting higher than expected growth in Q1 2019. In China, latest GDP data hints at a stabilisation in activity thanks largely to another sizeable fiscal boost. However, recent downbeat Euro area business surveys point to a continued sub-par performance in early 2019.
The EU granted the UK a further extension of Article 50, effectively pushing out the cliff edge to the end of October. Meanwhile, latest UK data was mildly reassuring, consistent with continued sluggish growth in early 2019.
This week is likely to see the EU grant a longer, but more conditional, extension to Article 50 than the UK Government has requested. Back in Westminster talks continue to try to find a set of proposals that can be passed by the House of Commons. Away from the politics, most economic data has been disappointing.
UK PM Theresa May failed for the third time to get Parliament to ratify her Withdrawal Agreement. More indicative votes take place in the House of Commons today. The probability of cross party support for a customs union has increased, but it is still hard to see how the impasse is solved. The UK is now due to leave the EU on 12th April, but a longer extension of Article 50 looks likely.
UK PM Theresa May’s meaningful vote on the Withdrawal Agreement takes place on Tuesday and so far looks set for another defeat. If the deal is rejected, again, the votes that follow will offer Parliament the chance to go for a no-deal Brexit (almost certain to be rejected) or request an extension of Article 50 (most likely). Such pivotal events are likely to overshadow the Chancellor’s update on the Government’s finances in the Spring Statement.
The landscape for UK politics is changing. News that seven Labour MPs and four Conservative MPs have defected to form a new Independent Group highlights the current fragmented state of UK politics. PM May delayed the “meaningful” vote on Brexit to March 12th, adding to the uncertain picture for the UK economy, meanwhile the labour market powers ahead.
The UK economy almost came to a halt in Q4 last year as mounting Brexit concerns took its toll on business investment. However, consumer spending maintains its gradual recovery, driven by higher real incomes.
Following a path laid by the US Federal Reserve, who recently adopted a more neutral position towards monetary policy, the Bank of England’s February Inflation report clearly signalled no urgency to raise rates. The 2019 growth forecast was cut sharply. The main culprits were mounting concerns about Brexit plus the wider global outlook.