UK: Slow-burn economic downturn - RBS

Research Team at RBS notes that the UK economy has held up better than many expected after the Referendum and it also appears to have had more momentum heading into the plebiscite than widely forecast.

Key Quotes

“This is unlikely to remain the case. A corporate led slowdown, through weaker investment in capital and labour, reinforced by slower private consumption growth on higher CPI inflation looks set to drive a slow-burn downturn in economic growth in 2017. This looks largely priced in by financial markets and the currency. It is most obviously apparent in Sterling’s inability to rally on positive data surprises.” 

“With monetary policy close to exhaustion, relative growth is more relevant for the currency in terms of funding of the current account deficit.”