UK: On the Slide? - ING
James Knightley, Senior Economist at ING, suggests that the concerns
about what Brexit could mean have already hurt UK sentiment, but there
is growing evidence that the broader economy is now feeling the pain.
Key Quotes
“Consumer
and business confidence readings have been coming under downward
pressure just as the Brexit debate has started heating up. So far, the
indicators are suggesting that most of the hit is to how households and
businesses perceive the outlook for the economy over the next twelve
months. However, a recent Deloitte’s survey indicated that business
perceptions regarding “risk”, such as hiring new workers or embarking on
capex are also deteriorating. There has been some evidence to suggest
that employment growth has slowed and with 1Q GDP coming in at 0.4% QoQ
versus 0.6% in 4Q15, there are hints of a loss of momentum.
Yesterday’s
UK manufacturing purchasing managers’ index added to the sense of
slowdown. It surprisingly dropped back into contraction territory,
coming in at 49.2 in April versus a downwardly revised 50.7 reading for
March. This was worse than the 51.2 consensus expectation and was the
weakest reading since March 2013.
Should the UK vote to stay in
the EU then we believe that activity will bounce back as the outlook
clears in an environment of relative sterling softness. However, should
the UK leave then the activity story is expected to weaken further and
likely prompt BoE policy easing with sterling coming under significant
selling pressure.”
