LONDON: In the week after Britain formally notified the European Union of its intention to quit the bloc, business surveys will give more idea of what — if any — impact Brexit is having on the British economy and how its EU peers compare.
Last month’s purchasing managers’ index (PMI) reports suggested unexpectedly strong growth in Britain’s economy since June’s Brexit vote may be starting to flag as inflation picks up, partly as a result of the pound’s post-referendum plunge.
Similar surveys have meanwhile suggested activity in the euro zone is picking up pace, with flash PMIs for the bloc as a whole, and its two biggest economies, Germany and France, hitting six-year highs in March.
Index provider IHS Markit will release PMI surveys for British manufacturing, construction and services on Monday, Tuesday and Wednesday respectively, with official data for manufacturing and construction output for February due to follow on Friday.
Economists polled by Reuters expect the PMI for the dominant services sector to tick up to 53.5 in March from February’s five-month low of 53.3. That reading suggested faltering consumer spending was starting to bite and pointed to first quarter economic growth of around 0.4 per cent — compared with 0.7 per cent in late 2016.
“UK PMIs for March, especially once combined with the February industrial production, construction and trade data should leave us with a very good feel for 1Q (first quarter) GDP by the end of the week,” Morgan Stanley economists wrote.
“Overall, we expect the data to point to some slowing in 1Q.”
Official data on Friday showed the services industry, which accounts for about two-thirds of Britain’s economy, contracted in January for the first time since March last year.
Other recent data has also suggested consumers are becoming more cautious.
British households’ declining spending power — real disposable income suffered the steepest quarterly drop in three years in October-December — led them to run down their savings to a record low in late 2016.
Sterling’s fall since the Brexit vote has kept manufacturing activity near 2½ years highs since the turn of the year, but recent surveys have suggested higher input prices are hitting new orders in the construction sector. The pound has lost nearly a fifth of its value against the dollar.
Manufacturing accounts for around 10 per cent of the British economy, with construction making up another 6 per cent.
Britain’s economy last year defied forecasts that it would slow sharply after the referendum decision to leave the EU, instead expanding faster than most of its developed world peers. — Reuters
Oman Observer is now on the WhatsApp channel. Click here
