October 10, 2017

Chart of the Week: Brexit-Related Uncertainty Weighs on Economic Sentiment in Q3

by Fathom Consulting.

by Fathom Consulting.

By distilling information from numerous consumer and business surveys into one measure, Fathom’s UK Economic Sentiment Indicator (ESI) provides a monthly snapshot of underlying growth momentum.

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Since the beginning of this year, survey-based measures of economic output, including Fathom’s ESI, have required a large pinch of salt — exceeding official output data by some way. More recently, however, that wedge has narrowed, with the UK ESI falling throughout the third quarter, to 0.5% in September.

While the vast majority of survey respondents were less confident than they were in the second quarter, the deterioration was most marked in the construction sector. Notably, the recent drop in the Construction Purchasing Managers’ Index to below the key threshold of 50 has brought it more in line with official data, which has pointed to a contraction in building activity for several months now. Respondents identified political and economic uncertainty weighing on investment decisions and extending lead times for budget approvals as the principal cause.

Looking ahead, we expect both our ESI and official GDP data to soften further from here.


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