Here is this week’s Director’s News Round up.
Gordon Polson – FOB Director
Economic News
Barclays UK economy highlights: The week starts with speeches from MPC members Tenreyro and Saunders. Tenreyro’s speech focused on the drivers of productivity and ways in which the UK can close the productivity gap with other advanced economies. With regards to monetary policy, Tenreyro stated that there is still ample time to monitor and assess the transmission mechanism of the nov’17 decision, and that a couple more increases are likely to be required over the next three years. She further commented that a different outturn for productivity growth would affect that policy rate path suggesting that risks to productivity were skewed to the upside over the medium term.
Michael Saunders continued to signal his stance at the hawkish end of the policy spectrum, stating that potential growth could be weaker than currently estimated, leading to greater risk of domestic price pressures building. Saunders expects further tightening in the labour market with unemployment rate falling further, triggering a faster pace of wage growth in 2018. Saunders also reminded us of Vlieghe’s point made in 2017, that there is considerable uncertainty over the exact level of interest rates that represents neutral and that further modest rate rises would simply move us towards a neutral rather than a restrictive stance.
According to recent investor survey, political risks (including Brexit negotiations) are still regarded as the biggest hurdle for markets over the next six months. However, a slightly higher proportion of investors believe that Theresa May will remain PM until negotiations are scheduled to end in mar’19. Investors regard the status quo as the least disruptive scenario and that a change in leadership continues to be seen as the biggest potential risk for markets. Investors continue to see a very low probability of a recession. Investor view on the inflation outlook has changed enough to reflect higher oil prices, but not enough to constitute a material change in cost pressures. Investors have shifted outlook for the BoE slightly, there are fewer investors who expect a hike in H1’18 and slightly more who expect hikes in 2019 or later. Investors remain divided over the potential path for negotiations, with European investors responding with a distinctly more pessimistic view than UK investors.
Industry makes strong start to 2018, but skill shortages persist:
According to CBI industrial trends survey q4’17, UK manufacturing growth accelerated over the past three months, yet skill shortages remain high on firms’ agendas. Growth in manufacturing output and domestic and export orders all picked up in q4’17, compared with q3’17. Stocks also continued to grow robustly, for example inventories of finished goods stocks rose at the fastest pace since oct’13. Investment intentions for both buildings and plant & machinery moved back above average after deteriorating in q3’17, while spending on innovation is expected to continue to increase at a robust pace in the year ahead. Employment grew at the fastest pace since jul’14 over the past three months, with further growth expected in q1’18. However, skill shortages are high on firms’ agendas, with the number of firms citing skilled labour as a factor likely to limit output over the next three months. Cost growth is expected to remain strong over q1’18, prices are set to pick up further across the board, with domestic price inflation expectations the strongest since 1984.
Rain newton-smith, ¢bi chief economist stated that it’s good to see manufacturing going from strength-to-strength with growth up and the buoyant global economy boosting export orders. She commented that the past depreciation in sterling continues to impact on firms’ costs and margins, with expectations for factory gate price inflation at their highest in 30 years.
Brexit: The first day of the EU (Withdrawal) Bill’s Second Reading will take place in the House of Lords today(Tuesday)
Groceries Code Adjudicator: is inviting all suppliers to a breakfast briefing with Christine Tacon, the Groceries Code Adjudicator, on 22 February from 08:30 until 10am at Victoria Square House, Victoria Square, Birmingham, B2 4AJ.
Please feel free to pass this on to any of your colleagues who may also be interested in attending.
We appreciate it is short notice, but hope you’ll be able to join us at our first supplier event of the year.
If you’d like to come, please do let us know by emailing enquiries@gca.gsi.gov.uk before 8 February 2018.
Other News
National Salt Awareness Week: CASH are inviting guests to attend their House of Commons reception on 14th March at 1-3pm.
Bread Promotion Activities in Europe Symposium-Register Now: http://www.breadpromotion.eu/
AIBI aisbl – International Association of Plant Bakers – Grand Place 10 – 1000 Brussels Tel: 0032-2-361 1900 – www.aibi.eu
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