Last week we were looking forward to a tranche of manufacturing-related data. But the releases all suggested that we shouldn’t hold out too much hope for a return to balanced growth in 2016q1. This week’s main domestic news is mostly about inflation – consumer price data and the Bank of England’s decision on interest rates. The main global data will come from China. And of course, flying largely under the radar, the starting gun will be fired for the EU referendum campaign.
Tuesday sees the release of CPI data for March. Talk of deflation has disappeared as CPI has been back in positive territory for the previous four months. At 0.3% in February, CPI is still low enough for the Bank of England Governor and the Chancellor to be in regular correspondence about what’s keeping inflation so low and what (if anything) the Bank needs to do about it.
The factors holding inflation down – fuel and utility prices mainly – will be hanging around in March’s release. While we’ve seen some weakening in Sterling since the end of last year, we’re not expecting that to make its presence felt in the CPI data just yet. A modest gain to 0.4% seems a likely outcome.
The Bank of England
No material changes in the data since the Bank’s last meeting would point to a change in stance on rates or asset purchases this month. Inflation is low, wages have edged a bit higher, but business surveys have been a bit weaker on the activity side. Seems a racing certainty that we’ll see another month of no change at Threadneedle St.
Over the course of this week we’ll see trade data (Weds), industrial production and 2016q1 GDP (Fri).
Growth has been slowing, with GDP expanding at 6.8% (officially) in the year to the final quarter of 2015. The evidence that we’ve seen over the first two months of this year points to more subdued activity over the quarter, with both exports and imports falling sharply in the year to February and the manufacturing PMI nudging past the no change mark, to 50.2 in March, for the first time in more than a year. The consensus expectation is for stabilisation with growth of 6.7% in the first three months of this year.
The formal campaign period kicks off on Friday, and the Electoral Commission will announce the official Remain and Leave campaign groups on Thursday. Then it’ll be just ten eventful weeks of, hopefully, informed and factual debate, on the UK’s membership of the EU until voters decide.
You can see what manufacturers think about the EU on our website here.