2. SUMMARY
RECENT ECONOMIC DEVELOPMENTS:
• Global economic activity has continued to slow down, driven by
regulatory tightening in China, weakened consumer and business
confidence in Eurozone, and continued global trade tensions.
• Recent labour market data in the UK remains positive and the
unemployment rate continues to fall
• However, living standards are precarious – the savings rate of UK
households is negative, and consumers may be unable to withstand
substantial shocks
LOOKING FORWARD:
• Chinese economy: China needs to continue regulatory reforms to
tackle financial vulnerabilities, while facing prospects of negative
impacts of trade tensions.
• US: As the fiscal stimulus fades, the pace of the economic expansion in
the US is forecast to slow. Fabian Society |YF Finance & Economics | 1
3. Main Economic Indicators
Fabian Society |YF Finance & Economics | 2
Indicator
Latest
change
6-month
trend
Comment
GDP growth IMF forecasts for both the UK and global economy have been downgraded.
Current economic activity - PMI indices were mixed, manufacturing up due to stockpiling, but services and
construction contracting.
Business confidence - - No significant change in business confidence in the last month.
Consumer confidence
(GFK / You Gov) change
Consumer confidence in February improved slightly from the previous month,
although the levels remain low.
FTSE100/250 The UK stock markets have continued to recover from a fall in Q4 2018, but at a
slower pace than the global stock markets.
Sterling / US Dollar -
The pound’s exchange rate was little changed by the extension of the UK’s
membership in the EU and fluctuated around the $1.30 mark.
Brent crude prices Oil prices continues to increase, driven by risks to supply, including the recent end
to Iran sanctions waivers by the US.
UK 10yr Gilts - Yields have remained close to 1.2%, down from over 1.3% at the beginning of the
year.
4. Source : IMF
The UK saw a downgrade in forecast growth in the recent IMF World Economic
Outlook
IMF Forecasts: UK GDP growth, annual
Fabian Society |YF Finance & Economics | 3
IMF Forecasts: Selected Countries GDP growth, annual
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
GDP,Annual%
Sep-17 Apr-18 Apr-19
0%
1%
2%
3%
4%
5%
6%
7%
United
States
Germany Italy Japan United
Kingdom
China
GDPgrowth,annual%
2018 (Actual) 2019 (Forecast) 2020 (Forecast)
5. 95
100
105
110
115
2015 2016 2017 2018 2019 2020 2021 2022 2023
RealGDPIndex
WEO April 2019 WEO April 2016 Scenario A Scenario B
Fabian Society |YF Finance & Economics | 4Source : IMF
IMF Brexit Forecasts show a persistent fall in GDP with a material impact on
the rest of the EU
Real GDP will fall by 4-5% relative to trend in a hard
Brexit
The economic impacts of Brexit will extend beyond the
UK
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
United Kingdom European Union
excluding United
Kingdom
World
LongtermrealGDPeffects
Long-term trade effects Long-term immigration effects
The IMF model two hard Brexit scenarios, optimistic scenario A and pessimistic scenario B – both forecast significant falls
in growth
• Scenario A - excludes border disruption, with limited tightening of financial conditions.
• Scenario B - includes border disruption, with severe financial tightening.
7. 0
1
2
3
4
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
NumberofPeople,millions
Up to 6 months Over 6 and up to 12 months All over 12 months All over 24 months
Source: Office for National Statistics
UK vacancy rate and real wages
The labour market continues to tighten, with a reduction in long term
unemployment
Fabian Society |YF Finance & Economics | 6
430
440
450
460
470
480
490
500
510
520
530
0
1
2
3
4
5
6
7
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
AverageWeeklyPay(£/week)
Unemployedpeoplepervacancy
Unemployed per Vacancy Average Weekly Pay (£/week)
Unemployed workers by duration of unemployment
8. BUSINESS CONFIDENCE, INDEX* CONSUMER CONFIDENCE, INDEX*
Source: YouGov/ONS (savings ratio)
* Score over 100 means more consumers are confident than unconfident
Consumer and business confidence remain low, while a negative savings rate
shows low consumer resilience
Fabian Society |YF Finance & Economics | 7
-30
-20
-10
0
10
20
30
40
50
-30
-20
-10
0
10
20
30
40
50
Q32010
Q12011
Q32011
Q12012
Q32012
Q12013
Q32013
Q12014
Q32014
Q12015
Q32015
Q12016
Q32016
Q12017
Q32017
Q12018
Q32018
Q12019
Smallbusinessconfidenceindex
Businessconfidenceindex
ICAEW BCM (all businesses) Small Business Confidence Index
-20
-15
-10
-5
0
5
10
100
102
104
106
108
110
112
114
116
01/2016
03/2016
05/2016
07/2016
09/2016
11/2016
01/2017
03/2017
05/2017
07/2017
09/2017
11/2017
01/2018
03/2018
05/2018
07/2018
09/2018
11/2018
01/2019
03/2019
Smallbusinessconfidenceindex
Businessconfidenceindex
Consumer confidence index Household net lending (% of GDP)
10. Source: Mergermarket
US: ANNOUNCED M&A DEALS*
UK: ANNOUNCED M&A DEALS*
* Lapsed / withdrawn bids are excluded
Steep decline in M&A deals in both the US and UK
Fabian Society |YF Finance & Economics | 9
Recent UK M&A news:
• The UK’s competition regulator has
blocked Sainsbury’s’ proposed £7.3bn
takeover of Walmart-owned Asda; a deal
which would have seen the supermarket
groups combine to overtake market
leader Tesco – Reuters
• Israel’s Delek Group is close to acquiring
Chevron’s oil and gas fields in the British
North Sea, which are valued at
approximately £1.6bn – Reuters
0
100
200
300
400
500
600
700
0
100
200
300
400
500
600
$bn
#
0
20
40
60
80
100
120
140
0
20
40
60
80
100
120
140
160
180
$bn
#
Number of deals 3-months value of deals
