Economics & Strategy Flash : Fading E numbers point to a cyclical UK slowdown
Chief Economist – Simon French +44 (0)20 7886 2753
To feed a child foodstuffs laced with E numbers buys time for parents, little more. The eventual comedown can be painful. The UK economy has been riding high on the additives of Exchange rate strength, Energy cost declines and real Earnings growth since mid-2013. Collectively these three Es are waning just as the fourth E – namely Europe – casts a lengthening shadow over domestic activity. Today’s slowdown in Services sector activity (Feb PMI@52.7 vs. 55.6 previously), slowing house price growth (Halifax @-1.4% MoM) and yesterday’s disappointing UK Construction PMI starkly illustrate that the cyclical sweetspot for the UK is now coming to an end. We recommend an opportunistic move out of UK cyclicals following a stellar run. The rebound in valuations since mid-February (+9.3%) has been unmatched by domestic macro drivers and now provides an attractive exit point. Read More…

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