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Specialising in the politico-economic risk analysis of the Commonwealth’s member states, we have created our own economic indicator for the UK economy which, otherwise, does not exist in this comprehensive form: the UKES. It consists of two components constituting the main index.
The component “expectations” runs ahead of the current situation, comprising elements such as development of inflation and interest rates, consumer- and business confidence, etc. The “state” component describes the current situation and comprises data such as industrial production, net trade, etc. The main index, then, is a smoothed combination of the two components.
+++30 August: Economic sentiment remains anxious as main indicator reaches the zero line+++
As Brexit is entering its dramatic final stages, the UK economy is stuck in bleak conditions. Yes, employment is still buoyant and at multi-decade highs, wage growth remains frothy and consumers therefore seemingly impervious to the uncertainty created by Brexit. And just as it had hit economic growth before, net trade made for a positive kink in the state component of our UKES between June and July due to collapsed imports as businesses depleted inventories built up in March in preparation for a no-deal Brexit. But in other areas of the economy, increasingly subdued sentiment has begun to take its toll. Manufacturing has been hit simultaneously by disruptions to its trade with the EU in anticipation of Brexit and by a general slump in external demand due to a global economic slowdown. Accordingly, investment has been being retrenched while the all-important services sector has now been stagnating for three months in a row. Small wonder, then, that the main indicator line of our UKES has finally reached the zero line, the watershed between expansion and contraction. Should the current constitutional stand-off between the government and Parliament result in a no-deal Brexit, Britain will hence be facing a recession without doubt.
Manufacturing PMI (Sep.)
Industrial prod. (Aug.)
Retail sales (Aug.)
Individual country ranges according to historic max-/min levels
Sources: US Bureau of Economic Analysis, US Bureau of Labor Statistics, US Census, Australian Bureau of Statistics, Instituto Brasileiro de Geografia e Estatistica, Customs General Administration of China, bloomberg, Institut national de la statistique et des études économiques (INSEE), UK Office of National Statistics (ONS), Trading Economics