13 Jan 2020
The UK economy contracted 0.3% in November, a bit worse than generally expected. There is some evidence of pre-Brexit effects at work, but, in reality, demand and investment remained weak. We’ll have to wait a while to see any evidence of a “Boris Bounce” post-election. Chatter in the halls of the Bank of England suggests increasing support for an interest rate cut, which has undermined the pound at the start of the year.
Payroll growth slipped to 145k in December (f/c 160k) from a prior 256k. As always we caution against taking too much from one number, especially with Christmas and the after-effects of Black Friday to consider. Wage growth fell from 3.1% to 2.9%, which was a surprise in light of an unchanged Unemployment rate (3.5%), which remains the lowest reading since man first visited the moon.
A fall of 1.3% in Factory Orders in November suggests continued gloom in Germany, but there remains some optimism that the US/China trade accord will mark the bottom.
Foreign Reserves remain rock solid at around $3.1 trillion. Notable that the yuan continues to recover, helped by improved sentiment around trade. Having hit RMB 7.2 vs the dollar last autumn, it’s now below RMB 6.9.
