Encouragingly, the figures for November show that growth was broad-based with 10 of the 13 sub sectors seeing output rise relative to October. Driving the recent resurgence in manufacturing has been the synchronised global upswing, with growth on an annual basis recorded at a robust 3.5%. Wider industrial production similarly rose 0.4% month-on-month corresponding with an annual growth rate of 2.5%. Construction output followed suit, also recording growth of 0.4% on the month and shrugging off consecutive declines of 1.1% and 1.9% in October and September respectively. The final release to contribute to the performance of the British economy were the trade figures. The trade deficit disappointed, posting a shortfall of £12.2bn which was above expectations. These figures help to complete a picture for the performance of the economy over Q4 as a whole and they support the view that GDP growth for the last quarter will be recorded at 0.4%.

Sterling edged down on Wednesday, hitting its lowest point in two weeks against the dollar. It retraced from a 3 ½ month high at the start of the month, with the feeling that significant new developments are needed for the currency to break out the $1.30-$1.36 range. With inflation data out next week, the market will look to take this into account when pricing expectations of the timing of the next rate hike from the Bank of England. Markets expect UK rates to only rise once in Q4 of 2018.

Phillip Hammond has gone on the offensive in calling on the EU to give more clues as to what they would like from the future relationship with the UK. He spoke to a business audience in Berlin yesterday telling them “It takes two to tango”. European leaders have already told Britain that they need to make it clear what the UK wants from its relationship with Brussels, and Mr Hammond’s plea brought negative responses from some EU officials. Angela Merkel is also maintaining a hard line stance against a bespoke trade deal for the UK, insisting that unless contributions are made to the EU budget and adheres to EU law, Britain cannot hope for a trade agreement that includes financial services. 

The day ahead

The Bank of England publishes its credit conditions and bank liabilities survey this morning at 9.30am. We then have figures for the EU19 industrial production output alongside those for Germany, France, Italy and Spain. The ECB will also publish its account of the December policy meeting giving some more clues as to the rationale behind their policy decisions and what they will be considering in future meetings. Stateside, the PPI index will released along with Weekly Jobless claims at 1.30pm. PPI is expected to increase month-to-month but by a smaller amount than last month’s figure. 

Thought of the day

Last night, football fans that watched the Chelsea vs. Arsenal League Cup semi-final on television witnessed VAR (video assistant refereeing) decide two possible penalty shouts. Whilst this wasn’t the first English game to use the new ‘technology’, it was certainly the most high-profile game to trial it and the reaction was largely positive. Former Gunner legend turned TV pundit, Thierry Henry, said that the man of the match was VAR! At Investec, we consistently look to innovate – we have our own version of VAR (otherwise known as our ‘Value at Risk’ analysis) that can be ‘plug and played’ into any firm with FX exposures, to quantify the risks they face from fluctuations in FX rates. Please speak to your FX dealer today to find out more about whether your interpretation of the FX risk you face matches that risks determined by Investec’s VAR analysis. If football can go down the route of being extra certain on key decisions, then so shouldn’t you?!