BOE risks repeat of Brexit pessimism as growth signals diverge

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Individuals with the Bank of England rates are at risk of reducing the power of the UK economy by trusting the low -business survey on government growth data.

Governor Andrew Bailey revealed last week that he was pushing more on indicators like the S&P Global Shopping Managers Index, and warning that “we have a long -running, short -run GDP number.” However, Boe Watchters cautioned against repeating the mistake made after the 2016 Brexit referendum, when officials made the policy easier to respond to a sharp recession registered in the survey.

Contradictory indicators threaten water at a time when BOE is deciding how much rates may increase, as it has a recent rise in inflation against the economy and Donald Trump’s trade war.

Official data shows that GDP growth has been firmly 0.7 percent in the first quarter – the strongest performance in a year. Nevertheless, the sign of growth by the PMIS, when the average is taken in a quarter, it shows a stable but stable image – which Boy believes that the basic state of the economy is more indicative.

The index showed practically zero growth in the first quarter. Then in April, the contraction fell into the area when businesses went up at Trump’s prices before doing business before reading a flat in May.

“The challenge we have at the moment is that the evidence waiting for the economy, so the surveys are not so strong,” Bailey told the Parliament’s Treasury Committee last week. He described the difference as a “invasive” and said that the Bo staff believes that private sector surveys are better predictors to the future of the economy than previous GDP data.

“Bailey is at risk of repeating the same error after the Brexit referendum,” said Robert Wood, the UK economist, the chief of the Panthon Macro Economics, when it was at risk of taking a weak PMI as a strong evidence of real growth, when it proved to be very misleading.

“There is strong evidence that when uncertainty increases, PMI is very disappointed about development because the quality of the survey means that it captures emotions rather than real development. The same thing will apply to Mr Bailey’s firms.”

Despite the political turmoil caused by the UK vote to leave the European Union, the economy increased by 1.9 percent in 2016, according to an average of the last six years.

Although the first quarter’s official data was promoted by temporary factors as manufacturers reached out to US taxes, there were also signs of power in services, which is the largest part of the UK economy.

Official data has faced suspicion between the flaws of the data that affect the labor market data, but also the GDP estimates have been covered. One of the concerns is whether they are adjusting to climate change in economic production.

“There is also some evidence to suggest that GDP data, especially for services like GDP, have been displaying some strong weather since the PMI, which is not clear in PMI,” said Chris Williamson, chief business economist, chief of S&P Global Market Intelligence.

This is a matter for the Office for National Statistics, and it found little evidence of the effect when it conducted a detailed examination on the possibility of residual climate last month.

Economists say that PMIS also has defects, especially in some sectors, such as retail, and government activity.

“But these surveys occupy about 80 percent of the private sector’s economic production, which reflects the costs of both business and households, which is a source of concern for both policy makers and investors,” said Williamson, which is a fundamental concern for both policy makers and investors.

The survey of PMI and other businesses and consumers has also decreased sharply to political news. In 2022, the first budget of Brexit, Liz Trus, the Mini budget and labor began all the misery, which did not agree with significant changes in economic basic principles such as GDP and unemployment.

Research by Bloomberg Economics shows that the increase in uncertainty does not always result in a closer extent for the UK economy. Chief UK economist Dan Hanson said history shows that the increase in policy uncertainty cannot be “not so much connected with the growth of GDP because the financial market has volatility or survey measures that make an impression of economic outlook.”

However, the PMI aligned with the misery of official data in the second half of 2023, when the cost -driven crisis made Britain a light technical recession.

“The danger is that with sending different indications on different indicators, it takes longer to understand the forces that run the economy,” said Roth Gregory, deputy chief economist of Capital Economics.