Graham Cross, CEO
The week beginning 7 November showed that predicting the future is difficult. Contrary to expectations, the 58th US Presidential election delivered a Trump victory. And similarly contrary to expectations, there was no subsequent Trump market collapse. Meanwhile UK trade deteriorated further. At the moment, we are far more concerned about the UK’s trade position than we are about Donald Trump.
According to the Office for National Statistics the UK’s ‘deficit on trade in goods and services was estimated to have been £5.2 billion in September 2016, a widening of £1.5 billion from August 2016’. And that is in spite of a 12% decline in sterling’s trade-weighted exchange rate. Contrary to reasonable expectations ‘exports decreased by £0.2 billion and imports increased by £1.2 billion’.
The rise in imports probably signals that the British economy remains robust but the slump in exports is certainly worrying economists over at Moody’s…
‘It takes time for exporters to renegotiate contracts and to secure market share, and it takes even longer for domestic companies to reorient towards the foreign market. Given that exporters have already started to raise their selling prices, we think that by the time those contracts are negotiated, the UK will have already lost most of the boost to competitiveness arising from sterling's plunge’.
Market indicators suggest that the Bank Rate will move toward 1.0 percent over the next five years.
The week ahead provides a relatively light schedule for economic releases with US inflation and US retail sales forming our pick of the week. We’ll comment on those next week.