Still No Post-Brexit Hangover For UK Economy, Pound Climbs

Talking Points

- The Confederation of British Industry’s quarterly business optimism index climbed to +15 in January from -8 in October, its highest level since January 2015

- The data added to evidence that there has been no adverse impact so far on the UK economy from the Brexit vote to leave the EU

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A strong set of figures released Wednesday by the Confederation of British Industry has again emphasized the lack of impact so far on the UK economy from last year’s Brexit vote to leave the European Union. The CBI’s headline quarterly business optimism index climbed to +15 in January, its highest level since January 2015, from -8 in October. An unchanged number was expected by analysts.

There were strong figures too for manufacturing order books, manufacturing output expectations, total new orders and a raft of other data, although the numbers also showed that business faces a sharp rise in costs after the British Pound’s decline in the wake of the Brexit referendum.

Those costs could come down again though, thanks to the Pound’s recent recovery. In London Wednesday GBPUSD climbed to its highest level for six weeks ahead of UK Prime Minister Theresa May’s Friday meeting with US President Donald Trump.

Chart: GBPUSD Daily Timeframe (June 2016 – January 2017)

According to Rain Newton-Smith, the CBI Chief Economist, “UK manufacturers are firing on all cylinders right now with domestic orders up and optimism rising at the fastest pace in two years.” She added: “The weaker Pound is driving export optimism for the year ahead, but is having a detrimental impact on costs for firms and ultimately for consumers.”

--- Written by Martin Essex, Analyst and Editor

To contact Martin, email him at martin.essex@ig.com

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