- Post-Brexit economic data highlights confidence concerns
- UK retail figures a dent in consumer confidence
- Bank of England likely to cut rates in its August decision
Britain’s economy appears to be shrinking, according to Markit’s PMI data released this morning. The results saw figures drop to 47.4, well below the expected 49.2.
PMI measures business activity trends and is a strong barometer for economic health. The release this morning is the largest drop in its 20-year history, putting the reading on similar levels to the banking crisis in 2009.
Coupled with today’s data, UK retail figures were also down 0.9% in the month of June, the Pound fell over a cent against the Euro in the wake of this morning’s release.
As expected, the recent flow of poor economic data has been linked to the Brexit outcome, but is it too early to draw conclusions?
Is Brexit the cause of poor economic data?
Although it’s very likely Brexit has had some impact on consumer spending and business activity, the recent spell of bad weather could have dampened retail sales. The Brexit outcome would have shocked business activity given the uncertainty ahead. But what is not clear at this stage is whether Brexit alone is the cause. Further economic releases in the later months could give us a clearer picture, it’s possible the trend will continue until Article 50 is invoked, which won’t be until 2017.
One thing is certain, markets are not willing to gamble and any signs of economic slowdown will cripple the Pound. Tomorrow’s preliminary GDP figures for the UK could see further weakness for Sterling.
Mark Carney may have to take precautionary action
As a result of this morning’s data, it’s plausible that Mark Carney may intervene at the next Interest rate decision in August. Although the lack of poor economic data supports action under normal circumstances, but given the hype surrounding Brexit an interest rate cut may be a likely precautionary decision.
An interest rate cut to 0.25% possibly 0% may be on the table and if this was to transpire, Pound Sterling could fall to the mid-teens making a currency exchange significantly more expensive.
Keep a close eye on economic releases this week and into next, making a transfer sooner rather than later could save you financially.