UK: Economic concerns persist – Westpac

Despite a lift in Oct. PMIs, BoE’s near glacial path towards 1% Bank Rate by end 2020 reflects their clear concerns over how much Brexit will weigh on both business and consumers, explains Tim Riddell, Research Analyst at Westpac.

Key Quotes

“Although BoE’s Agents’ Report provided some positive insight on potential wage growth and recruitment difficulties (so turning attention to next week’s employment data), the service sector (around 80% of GDP) is still languishing. A special report on business investment outlined that intentions may be solid next year but set to tail off over the subsequent two years.”

“An uncomfortable mix of misdemeanours is increasing the political vulnerability of May’s govt. into the 22 Nov budget. The tightness of public finances means that the budget is unlikely to provide a fiscal boost and Brexit talks are failing to show any positive breakthrough.”

“Rebounds should be limited. Political, Brexit and investment pressures are likely to undermine GBP into the budget.”