UK: Economy subjected to political considerations - BBH

The UK, which reports important economic data, is subjected to political considerations, according to analysts at BBH.  

Key Quotes

“The EU's Barnier's claim that Brexit talks are deadlocked means that the heads of state (EU Council), which meet at the end of next week, are unlikely to overrule their chief negotiator.  That means that the familiar issues, like the exit bill, Northern Ireland's border, and citizens' rights will continue to be discussed.  If "sufficient" progress is made, December is the next window of opportunity to shift the talks to the new relationship and trade.”

“Ahead of the UK inflation, retail sales and labor market reports, the market is discounting more than a 75% chance of a rate hike next month.  BOE Governor Carney has not wavered in his assessment that a rate hike may be necessary for the coming months.  Speculators in the futures market, a proxy for trend followers and momentum players, are net long 15.5k sterling contracts.  As recently as early September, they were net short 53k contracts.”  

“The Bloomberg survey finds a median of respondents expect inflation to tick up.  However, average weekly pay is not likely to rise, and retail sales are expected to have softened.  Separately, the BOE reported last week that UK banks had tightened credit for unsecured borrowing, and annual growth in consumer credit slowed below 10% for the first time since April 2016.”  

“Market positioning suggests the reaction may be more dramatic to disappointment, especially anything that would justify waiting an extra month before hiking rates.  Many economists still expect UK inflation to peak here in Q4, while the economy continues to gradually slow.  The expansion is likely slowing for the third consecutive year.”