Still no closer to Brexit and trade wars are back in the headlines
By Sarah Ryman
The UK has had some strong economic data released this month. First quarter growth demonstrated that the economy is growing at 1.8% with growth of 0.5% between January and March (up 0.2% on the previous quarter) according to an initial estimate from the Office for National Statistics. It is thought that fears of crashing out of the European Union without an exit deal led to widespread stockpiling by retailers which helped the manufacturing sector to expand at its fastest pace in 30 years.
The British employment boom is set to continue as businesses shrug off Brexit uncertainty and become increasingly confident, according to a quarterly survey of more than 2,000 employers by the Chartered Institute of Personnel and Development. Unemployment is down at a 45-year low of 3.8%.
The Bank of England has warned that interest rates must rise after a Brexit deal is agreed to stop the economy from overheating. On the other hand, growth in Britain’s dominant economic sector was ‘near-stagnant’ and the outlook remains subdued, according to the closely watched Purchasing Managers’ Index.
Global growth continues to splutter; Philip Hammond warned that a further escalation of the trade war between the United States and China would have serious consequences for Britain. The chancellor spoke after the US raised tariffs on $200 billion of Chinese imports from 10% to 25% and President Trump threatened to impose duties on a further $325 billion of Chinese goods.
US inflation fell in March which will keep pressure on the Federal Reserve to hold back from raising interest rates while US President Donald Trump would like to see rates cut.
Non-farm payrolls expanded by 263,000 jobs in April - ahead of forecasts of 185,000 - the US Department of Labor’s employment report showed this month. Unemployment fell by more than expected from 3.8% in March to 3.6%, the lowest since December 1969.
President Trump has turned up the heat on Beijing and it appears the trade war between the world’s two largest economies is escalating. Hope remains that some agreement may be reached at the G20 summit next month.
The European Union halved its growth prediction for the German economy this month as it forecast lower growth for the Eurozone as a whole which served to highlight the extent of the bloc’s economic challenges.
The European Commission said that Italy’s budget deficit will reach 3.6% of GDP in 2020 which, should they be proven right, would breach the EU’s 3% limit which could well fuel tensions between Rome and Brussels. The Commission predicted slower growth of 1.2% in 2019 (down from 1.9%) and referenced “rising protectionism” globally and tighter financial conditions having “weighed on investment, activity and trade”.
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