UK Chancellor Sajid Javid has announced that there will be a budget on 11 March — the new government is expected to get the chequebook out to finance public investment in infrastructure and other projects. After stripping out the effects of the economic cycle, the UK government’s current receipts exceed its current expenditure by an amount equal to 2.0% of GDP, with the impact of the post-2010 austerity programme clear. Refresh the chart in your browser | Edit the chart in Datastream Fathom’s Macroeconomic Policy Indicator suggests that fiscal policy was broadly neutral for growth last year; with ample fiscal space, we

Fathom’s UK Economic Sentiment Indicator, which weights together a range of business and consumer surveys, was -0.2% in November — the lowest reading since August 2009. This gauge, which is calibrated to have the same mean and standard deviation as quarterly GDP growth, has been in contractionary territory since the summer. In our judgement, the UK ESI provides a useful guide to the underlying pace of economic activity. Based on survey data, it is more timely and less erratic than the official GDP statistics. Taking into account the official statistics available to date, and other indicators of economic activity including

The last three readings of Fathom Consulting’s UK Economic Sentiment Indicator (up to October), have been stuck at -0.2%, a level last seen towards the end of the global financial crisis. The negative outlook has been driven largely by Brexit uncertainty, with all 12 components of the ESI at lower than normal levels. Refresh the chart in your browser | Edit the chart in Datastream Despite contracting by 0.2% in 2019 Q2, data released earlier this month showed that the UK avoided a recession. Growth of 0.4% in July offset contractions in both August and September to show Q3 growth of 0.3%.

Refresh the chart in your browser | Edit chart in Datastream The UK economy has avoided a technical recession, with output expanding by 0.3% in Q3 following a contraction of 0.2% in Q2. Nevertheless, the Q3 data were below both our own forecast (+0.5%), and the median forecast among private sector economists as surveyed by the Reuters Poll (+0.4%). The relatively new monthly measure of GDP is erratic. However, it suggests that UK economic output has been broadly flat for much of this year. Positive growth contributions from the household sector have, by and large, been offset by negative growth contributions from

Fathom’s UK Economic Sentiment Indicator (ESI) was -0.2% in September, unchanged from the figure for August. It has not registered such a low reading since the tail end of the 2008/09 recession. Our UK ESI provides a useful indicator of the underlying pace of economic activity, and tends to be less volatile than the official measure of GDP growth. With the date of the UK’s departure from the EU now further postponed, and with the prospect of a general election within the next few months, the risks to UK economic sentiment and to economic growth lie to the downside. Refresh

Fathom’s Economic Sentiment Indicators (ESIs) distil the information contained within numerous surveys into composite measures of underlying sentiment. The UK ESI dropped to -0.2% in August, the lowest since the crisis, and continues the downward trend in sentiment that began last year. The drop was driven by expectations, with the forward-looking components of the ESI performing the worst. Only two of our thirteen components showed improvements from July. Refresh the chart in your browser | Edit chart in Datastream Before being shut down earlier this month, the British parliament passed a bill intended to prevent a ‘no-deal’ Brexit on 31 October. Despite

Fathom’s UK Economic Sentiment Indicator (ESI) was unchanged in July, at 0.0%. The ESI proved to be a useful indicator of underlying economic momentum through the first half of this year; a time when the official statistics were distorted by a large and short-lived inventory cycle caused by preparations for a no-deal Brexit. We see close to an evens chance of a second consecutive contraction in UK economic output in Q3, which would push the economy into technical recession — much will depend on the response of firms to the prospect of a no-deal Brexit on 31 October. Whether the

On Tuesday 23 July we are set to discover the identity of the UK’s next Prime Minister. There are just two candidates: former Mayor of London, Boris Johnson; and current Foreign Secretary, Jeremy Hunt. Boris Johnson is reportedly the clear favourite among the electorate, which in this case consists of 160,000 paid-up members of the ‘ruling’ Conservative Party. The UK’s next Prime Minister will inherit an economy that, Brexit aside, is in a vulnerable position. Near-stagnant labour productivity since the Global Financial Crisis of 2008/09 means that trend growth in the UK economy is now somewhere in the range 0.5%-1.0%.

Our UK Economic Sentiment Indicator (ESI) slipped to 0.1% in May, matching the reading seen in the immediate aftermath of the EU referendum. Back then, sentiment recovered quickly, as both firms and households refocused their attentions on more near-term issues, placing Brexit in the ‘something to worry about later’ category. But with political and economic uncertainty likely to remain elevated, at least until the autumn, we are unlikely to see such a pronounced rebound in confidence this time around. Refresh the chart in your browser | Edit chart in Datastream Our UK ESI tends to be more stable than the ONS estimate

Confidence about UK economic prospects remains subdued, with Fathom’s UK Economic Sentiment Indicator (ESI) unchanged at 0.2% in April. In common with many forecasters, Fathom correctly predicted a preliminary estimate of GDP growth in 2019 Q1 of 0.5%. It seems that preparations, by firms and households, for a potentially disorderly Brexit on 29 March boosted economic activity during the first quarter; with underlying economic growth at the start of this year close to 0.2%. In our judgement, the risk is that the actual data for Q2 will be correspondingly weak, as firms and households run down stocks built up in

Fathom’s UK Economic Sentiment Indicator (ESI) declined for the seventh month in a row in February, sinking to just 0.1%. The fall in confidence among UK firms and households since last summer has been broad-based, with all but two of the thirteen components heading south. Heightened uncertainty about both the timing and the nature of the UK’s departure from the European Union, captured by our ESI, has already had a measurable impact on economic activity, particularly affecting business investment. Indeed, we estimate that it has added some 300 basis points to the required return to investment projects, which makes it

Fathom’s UK Economic Sentiment Indicator (ESI), which had been unusually stable for more than a year, fell from 0.5% in September, to 0.3% in both October and November. This latest reading is the weakest since the immediate aftermath of the EU referendum, held on 23 June 2016. It supports our view that the UK economy, boosted by a prolonged period of unseasonably warm weather through the spring and the summer, has slowed in recent months. We expect growth of just 0.1% in Q4. Refresh the chart in your browser | Edit chart in Datastream ______________________________________________________________________ Thomson Reuters Datastream Financial time series database