Spread betting – Brexit impact on markets and consumers muted but businesses less confident.

Consumers have proved remarkably insouciant in the wake of Britain’s vote to leave the European Union. Perhaps that’s because they voted for it. Businesses are less upbeat, which should hardly surprise given the warnings from large and small firms ahead of the vote. So just what does the economic landscape of the UK look like now? A raft of economic data in the last month or so suggests no one really knows.

Brexit_flags

Upbeat?

 

Confounding expectations for the post-Brexit Armageddon, there has in fact been some pretty solid data from different corners of the economy.

Manufacturing grew at a slower pace in the three months to August than compared to the quarter to the end of July. But this was still a faster rate of expansion than in the spring and the weak pound meant that exports rose.

The CBI report showed 34% of firms questioned reported a rise in output versus the 23% that reported a fall. The +11% difference was down from the +16% in July but hardly a meltdown.

Meanwhile, consumers appear pretty unperturbed by the vote so far. Retail sales powered on in July as shoppers hit the high street and went online. Inflation is also improving – ticking up towards the Bank of England’s target.

Property

 

The residential property sector has delivered some mixed signals, but on the whole it’s been broadly positive. HMRC data shows house sales held up, although lending figures reveal that the mortgage approvals dipped 5%, indicating that consumers have retreated from purchases.

Persimmon joined other FTSE-listed housebuilders in reporting a strong first half and saying that current trading had not yet been affected by Brexit. It said visitors to its sites were up 20% and despite a slight increase in cancellations in the week after the vote, these are now below average.

Analysts expect the property market to cool now, with Countrywide forecasting prices to fall 1% in 2017. UBS thinks prices will hold up well in 2016 and indeed so far there appears to be limited impact on headline prices. Lower interest rates and the prospect of more government support should offer some succour, while a shortage of supply should keep a floor under the market even if activity sinks.

Jobs

 

Unemployment figures have also proved resilient. The number of people claiming unemployment benefit actually fell in July and the jobless rate is at a very healthy 4.9%.

However we shouldn’t read too much into the marginal fall in people claiming unemployment benefit in July. Higher self-employment numbers could mean people are not getting enough hours and indeed average working times fell.

Employment is a lagging indicator so we’ll have to wait for the report in three months’ time to really judge what has happened.

The Recruitment and Employment Confederation said permanent placements went into freefall in July, confirming evidence that the number of advertised jobs dropped by 700,000 in the week after the vote.

The Bank of England has warned that jobs will be lost, while the National Institute of Economic and Social Research said 320,000 jobs could be shed as the UK economy has a 50% chance of entering recession in the next 18 months.

Upcoming data

 

Looking ahead, there are some important data releases that will offer more clues about the real impact of Brexit on the UK economy.

Next week sees the release of the GfK consumer confidence survey, with the triple bill of PMI data also due out at the start of September.

Last month’s downbeat PMI data was a key factor in the Bank of England’s decision to cut rates and re-launch quantitative easing. Overall the outlook looks a bit better than at the start of August, but the economy looks like it’s on a knife-edge.