Fathom’s UK Economic Sentiment Indicator (ESI), which distils information from a wide range of business and consumer surveys, eased from 0.6% in May to 0.5% in June. Optimism among manufacturers remained high, but there was a further deterioration in sentiment among consumer-facing service sector firms.
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At its meeting on 2 August, the Bank of England’s Monetary Policy Committee voted, as expected, to increase Bank Rate by 25 basis points to 0.75%. In our judgement, with Brexit-related uncertainty continuing to weigh on economic activity, UK growth will turn out significantly weaker than the average of 1¾% per annum pencilled in by the Committee, bringing inflation back below the 2.0% target before the end of this year. The August rate hike should not be viewed as the first of many.
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