The latest monthly UK PMI surveys point to stagnating growth in Q2, with the rising risk of a contraction in activity. Last week’s dovish speech by BoE governor Carney hinted the central bank may hesitate in raising UK rates.
President Trump agreed a détente with President Jinping, bringing some respite from the ongoing trade war. It should provide some short-term relief to markets. But it’s premature to suggest a deal is a foregone conclusion
There’s a renewed sense of caution amongst central bankers. Both the Fed and the ECB are moving towards renewed policy support while the Bank of England has softened its stance on rate hikes. Pessimism over the global outlook and below-target inflation are to blame. The problem is their armouries are looking rather bare.
An unexpected decline in April GDP, driven by sharply weaker manufacturing activity, has increased the risks of UK growth stagnating, or even contracting, in Q2 2019. Still, continued favourable labour market conditions remain a key support for the resilient consumer, lessening the risks of a more pronounced downturn.
The resignation of UK PM Theresa May has prompted a flurry of contenders for the Tory leadership – the contest officially begins June 10th with the victor likely announced by the end of July. Boris Johnson is the bookies’ early favourite, fanning fears about a possible no-deal Brexit. The strong showing of the Brexit party in EU highlights increased fragmentation in UK politics. Meanwhile, latest UK data shows consumers continue to open their wallets.
US/Sino trade tensions are rising. US President Trump’s announcement of new tariffs on Chinese imports has prompted threats of retaliation by China, posing downside risks to the global economy as supply chains are disrupt and business sentiment suffers. Meanwhile, UK Q1 GDP data highlights the resilience of the UK economy.
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.