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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.
+++3 January: Sentiment recovers towards year’s end, but current conditions still heading downwards+++
What goes down will go up again eventually – this topsy-turvy variant of popular wisdom holds particularly true for human sentiment. And just as reliably, the expectations component of our UKES tends to recover after steep falls or reaching new troughs, and it’s no different this time. After marking a new three-year low, economic sentiment in the UK bounced back towards neutral levels again, if not very convincingly so. Yet what really undermines this recovery of sorts is the parallel and sustained decline of current trading conditions as depicted by the UKES’s state component: Notwithstanding massive volatility in inventories and net trade contributing to an upward jolt in the run-up to the mooted Brexit date of October 31, the state component has established a downward trend ever since the dust had settled in the aftermath of the referendum shock in 2017. We don’t anticipate the so-called “Boris bounce” to end that picture materially; only a massive and surprising spending programme by the Chancellor of the Exchequer might effect such change. In the meantime, Brexit uncertainty will resume around the impending trade negotiations between Britain and the EU, and that will do no good for business investment anyway in a parlous state for years now – Hard to find any optimism under these circumstances.
Retail sales (Dec)
Consumer confidence (Dec)
Services PMI (Dec)
Composite PMI (Dec.)
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