The UK economy is sending mixed signals of resilient performance and negative sentiment. The latest PMI readings, both in services and manufacturing, plunged below 50, signaling a contraction. Consumer confidence took a nosedive to -12 in July from a -1 reading just a month before. And in the real estate sector, the latest survey of the Royal Institution of Chartered Surveyors of estate agents showed that only 23% of the participants expected housing prices to rise in the next twelve months.
The Bank of England, at its August meeting, responded with sweeping measures to ease monetary conditions. The BoE cut the benchmark interest rate by 25 bps to 0.25%, eased capital requirements for UK banks which will free up £150 billion of liquidity, and the “crown jewel” – a new round of £60 billion in Quantitative Easing, bringing the QE total to £435 billion.
Nevertheless, Key data released in the UK this week suggests that the overall economy is rather resilient, with unemployment holding at 4.9% and core inflation falling only moderately, from 1.4% to 1.3% year-on-year.
So where is UK economy heading? Continue reading "BoE Easing Will Be Short-Lived"