Week ahead 27th June

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The main focus this week on the economic front will be the manufacturing PMI.

Manufacturing PMI likely remained weak

The manufacturing PMI for June is due Friday. The report will be one of the first out since the UK referendum on EU membership last week. However, the PMI is more likely to provide guidance about any impact of uncertainty ahead of the vote rather than the actual outcome itself because it was conducted before the referendum result was known. The results of our Manufacturing Outlook survey for 2016q2 provided few concrete signs that the uncertainty ahead of the referendum had a tangible impact on the sector. While negative for the fourth quarter running, the balance of responses across almost all of our major indicators showed another quarter of improvement in 2016q2.

The PMI moved back into the black in May but the very modest improvement wasn’t enough to prevent further job losses across the sector.

A first look at the current account for 2016q1

The balance of payments report for the three months to March is also out this week. The current account balance deficit widened significantly in the final quarter of 2015 to 7% of GDP, the largest on record. The main driver was the primary income balance, which slipped further into the red as the income and interest paid to foreign holders of UK assets exceeded that to British owners of foreign assets. Also, the trade balance deteriorated, largely driven by a fall in exports of goods.

The current account deficit likely improved somewhat in early 2016 as already-released data shows the trade gap narrowed on the back of higher exports.

This week also sees revised estimate of GDP at the start of the year. UK economic growth slowed to 0.4% in 2016q1 from 0.6% in late 2015.

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