Available Data for July and August Paints Picture of Economy in Relative Stagnation

Available data for July and August have so far painted a picture of an economy in relative stagnation — with some bright spots, such as the manufacturing sector, some weak spots, such as construction, and widespread indifferent spots, particularly in the dominant services sector.

Action Economics said that they expect more of the same as a mix of a weak pound, Brexit uncertainties, strong global growth and geopolitical uncertainties play out. The calendar this week is highlighted by the September Bank of England Monetary Policy Committee meeting (announcing Thursday).

Action Economics said that they expect a no change outcome, albeit with the two dissenters from the previous two meetings, Michael Saunders and Ian McCafferty, repeating their votes for a 25-basis-point hike in the repo rate to reverse the post-Brexit “emergency” cut and return the repo to 0.5%.

Action Economics said that they don’t anticipate much change in the tone of the guidance from that delivered in August. Data this week will be highlighted by the August inflation numbers (Tuesday). They expect headline consumer price index rate to pick up to 2.8% y/y from 2.6% in July (median same). Such an outcome would be consistent with BoE projections.

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