Initial estimates of third quarter growth are starting to be released.
Brexit and Business: 7 days of Economics
July’s improvement in the business climate in France stands as an exception. The Insee composite index regained the two points lost in June. After disruptions due to the blockades of refineries and other labour unrest, the catching-up effect won the upper hand over the negative effects expected from all the uncertainty engendered by the Brexit vote.
The only trace that could be seen was in the business leaders’ assessments of their own production prospects, which dropped 6 points. Otherwise the results were strong. For the first time since November 2014, there was a widespread improvement in business confidence, which touched all sectors (confidence rose 1 point in industry and construction, 2 points in wholesaling and 3 points in services and retailing). Markit PMI indexes (flash estimates) point in the same direction, albeit more moderately. The composite index gained 0.4 points to 50, lifted by the manufacturing sector as well as services. In contrast, the same figures for the Eurozone were in decline, with a sharp drop in manufacturing (down 0.9 points to 51.9) and virtually none in services (-0.1 point to 52.7), which limited the overall decline in the composite index (-0.2 points to 52.9). In the UK, the business climate index plunged, down nearly 5 points in services (to 47.4) and 3 points in manufacturing (to 49.1). The composite index shed 4.7 points to 47.7. Although the decline in the UK was surprisingly strong, it seems only natural that it would be the first to feel the negative effects of Brexit. Even so, we should continue to expect knock-on effects to strain activity on this side of the Channel.