All eyes on UK GDP data

29 Mar 2018

At the second estimate, Q4 GDP figures were revised down to +0.4% (qoq) from +0.5%. The UK statistics office pointed to a number of very small revisions across a few categories pushing the GDP estimate down


Looking at the data released since that second estimate was published, our best guess is that at the third estimate, due to be released this morning, GDP will be left unrevised at +0.4%. The more significant interest for this morning’s publication will come from the national accounts detail released at this time. This will include any revision made to the likes of household expenditure estimates released last month, which showed spending remaining relatively subdued in the final quarter of the year. We will also receive the likes of real household net income data and the latest saving ratio figures, shaping our understanding of the position of households financially and with it broader economic momentum as 2017 closed.

Brexit news

It’s probably worth noting that we’ve only 365 days to go before the UK officially exit the EU. A year is a long time in FX markets and with such a job of work still to do, the BoE yesterday took it upon itself to reassure all involved that they felt it was “reasonable to plan that they (UK corporate sector) will be able to continue undertaking activities during the (Brexit) implementation period in much the same way as now”.

UK consumer confidence

The GfK measure showed confidence rising to -7 in March from -10 in February, whilst consensus expectations had been for a steady -10 reading. The detail of the survey showed households, in particular, feeling more optimistic about their personal financial situation for the next 12 months, with a five point rise in this component of the index. There was also a four point rise in views of the general economic situation over the next month’s whilst the major purchase index climbed by two points. Overall, it appears that we are finally seeing the early stages of an improving consumer backdrop as inflation starts to edge down and as pay growth creeps up, with further gains on this front likely as the year progresses and as inflation moderates further.

Irish Economy: NTMA cancels another €500m of legacy debt

The NTMA announced yesterday that it has cancelled another €500m of the Irish FRB that had been due to mature on 18 June 2047. This debt was linked to the landmark IBRC transaction in 2013, which was a major milestone on the road to Ireland’s return to creditworthiness. To date the NTMA has repurchased €10.5bn of the €25bn of bonds issued as part of the ‘Prom Note’ deal, with €1.0bn of these repurchases happening since the start of 2018. All of the bonds were held by the Central Bank of Ireland, whose holdings have previously attracted adverse comment from the ECB relating to monetary financing concerns, although Frankfurt has since acknowledged the progress made in reducing the stock of IBRC-related assets. While the effective servicing cost of the IBRC-related bonds is immaterial (as the Central Bank repatriates most of its profits to the Exchequer), the repurchases serve to improve the optics of Ireland’s headline debt/GDP metrics. The remaining IBRC-related bonds have a weighted average maturity of c. 32 years (it is again worth noting that the Prom Notes had been scheduled to mature over the 2010-2031 timeframe). This latest buyback is not a game changer by any stretch, but like its predecessors it is still helpful in terms of marginally improving Ireland’s headline debt/GDP metrics.

HBRN: New letting at 1WML

Hibernia REIT (HBRN) has announced the letting of 48,500 sq ft at its 1WML development “to a company in the technology sector”. Separately, Depfa Bank, the sole tenant of the 47,000 sq ft Forum Building in the North Docklands, has given notice of its intention to exercise its option to terminate its lease next March. In the group’s early February trading statement, management said that of the 7% vacancy rate across its portfolio, “the majority of this…is in 1WML, most of which is now under offer”. As a result of this new lease, over 96% of the commercial space and 100% of the residential accommodation in 1WML is now let with contracted rent of €7.5m per annum and a WAULT of 11.5 years for the commercial space. 1WML has 124,000 sq ft of offices (24,000 sq ft let by Core Media, 36,000 sq ft by Informatica, 10,000 sq ft let by Pinsent Masons and now 48,500 sq ft by the new tenant), 8,000 sq ft of retail and 14 residential units. In the new letting the tenant will occupy the first and second floors of the building and 13 car parking spaces on two leases with an average unexpired term of 20 years and average term certain of 11.5 years from lease commencement. They will pay €2.8m initial rent, which works out at €57 per sq ft but this includes contributions to the reception and Townhall areas and car parking. The lease for the second floor will commence in July, with the lease on the first floor commencing next March. Turning to The Forum, it was reported in yesterday’s Irish Times that Depfa was relocating to the Irish Life Centre 750m away from its existing premises, so this news isn’t a particular surprise. Depfa was paying €2.0m per annum (an average of €40 per sq ft for the office space) to HBRN, but that was at a discount to ERV (Depfa is paying €45 per sq ft for its new office accommodation).

Economic Releases

09.30   UK   BoE Consumer Credit
09.30   UK   GDP
13.30   US   Continuing Jobless Claims
13.30   US   Core PCE Price Index
15.00   US   Michigan Consumer Sentiment
18.00   US   FOMC member Harker speaks