Soft start to big week of data releases for GBP
|There’s a plethora of UK economic releases this week that will go some way to determining whether an August hike from the Bank of England is on the cards - and the early indications are not positive for interest rate hawks. While the latest manufacturing production number is probably the least important of them all, the unexpectedly large drop has weighed on the pound which is trading lower against all its major peers barring the Japanese Yen.
Manufacturing and construction figures disappoint
Whichever way you look at it, these figures for April paint a pretty bleak picture for the manufacturing and construction sectors with the the fall in manufacturing production is m/m terms the worst since June 2012. In addition it also marks 3 consecutive monthly declines for this indicator and even though the latest PMI indicates some rebound for May, there’s next to nothing here that would suggest the BoE need to hurry in tightening policy further. The fall in construction output is the largest in almost 6 years and, perhaps most worryingly of all, there is a clear a lack of new work so far this year which suggests that there won’t be a marked improvement anytime soon.
Tomorrow sees the latest employment figures released before the consumer price index on Wednesday and retail sales on Thursday. Recent PMIs have shown some improvement from an unexpectedly weak first quarter, but overall it looks like Carney and his fellow MPC members made the right call in backing down on a May hike. Unless there’s a significant pick-up in economic data in the next month or so, or further signs inflation won’t continue to come back to target on its own, then it’s hard to see much justification for tightening anytime soon and this will likely keep any pound rallies subdued.
Poundland enters administration
Following the collapse of talks with a potential buyer, R Capital, it looks like Poundland is set for administration with up to 5,100 jobs at risk. The discount retailer seems to be the last in a long line of high street retailers who are struggling to continue as a going concern with losses of £17.1m in the past year - up from a £5.4m loss the year before. Poundland has 355 stores and serves 2 million customers a week but the latest collapse provides further evidence of the struggles in the area with House of Fraser announcing just last week that they would close over half of their stores and both electronics chain Maplin and Toys “R” Us entering administration already this year.
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