In what is now becoming a regular occurrence, this week in Brexit has surprised the experts:
Yesterday saw the pound rally on the release of unexpectedly strong Manufacturing PMI Data.
The Markit/CIPS Manufacturing Purchasing Managers Index rose to 53.3 in August, a sharp recovery from a 41month low of 48.3 in July. Manufacturing firms reported strong inflows of new work, both domestic and export based.
Any figure above 50 indicates expansion in the sector. This confounded analysts’ predictions, many of whom were expecting the August figure to be around 49.
Following the news, the pound jumped by 1%, against the dollar, to just under $1.33. Against the euro, the pound was 0.6% higher at just under €1.19.
This has led some commentators to call on the Bank of England to avoid any further easing of monetary policy in the present conditions. The weak July figure for the Manufacturing PMI, potentially a sign of an impending downturn, was one the reasons behind cutting the interested rate to 0.25%.
FTSE 100 & FTSE 250
By contrast, the stronger pound knocked the FTSE 100 down 0.5% by close of trading on Thursday. The largely internationally focused FTSE 100 companies typically benefit from a weaker pound. Oil stocks were also down.
On the other hand, house builders continued their post-referendum rally. Nationwide data released on Wednesday revealed that house price growth picked up in August as post-Brexit Britain once again challenged experts’ expectations.
The FTSE 250, a more sensitive measure of confidence in the UK economy, rose 0.7% in response to the Manufacturing PMI data release.
As the data points to consumers and businesses cracking on with little regard for the Brexit vote, the IMF have revised their predictions for the post-referendum UK.
Yesterday, the IMF declared that growth pre-referendum has ‘surprised on the upside’ and that ‘short-term turbulence has ebbed’. However they did reaffirm concerns about ongoing ‘political uncertainty…concerning the development of the relationship between the United Kingdom and European Union’.
They also singled out the Bank of England for praise in steadying the economic ship with their decisive monetary policy.
We are of course still in something of a “phony war” period – while the vote has been cast there have yet to be any real changes to the UK’s relationship with the EU or meaningful negotiation.
What will happen when Article 50 is eventually activated? Well, if the last few months are anything to go by, it’s anybody’s guess.
This Week at the Chambers
This week we’ve been working hard to keep our members informed about the latest local economic developments and champion our marvellous city-region.
We issued comment on the latest FDI figures for Greater Birmingham and Solihull and the West Midlands (click here). Our region has become quite adept at attracting Foreign Direct Investment, with FDI projects up 188% since 2010/11.
We’ve launched our latest Quarterly Business Report Survey (click here to take part). This is the first post-referendum QBR and will give us some valuable data on how businesses are responding to and affected by the vote. Please do take part, it only takes a few minutes and you’ll be entered into a fabulous prize draw as a thank-you.
We are also proud to announce that the Greater Birmingham Chambers of Commerce will be among the sponsors for this year’s Birmingham Literature Festival. Naturally, we’re very excited about this event that will both showcase home grown talent and attract national and international speakers and visitors to our fabulous city.
Finally, last Friday, we held a More Tea Less Hate tea party for our colleagues. The latest call to action from grassroots community group Worrying Signs, More Tea Less Hate is a nice way of celebrating the diversity of our workforce and spreading positivity in the wake of the rise in reported incidents of racism post-referendum. With the added bonus of cake.