Policy and data updates
World economic growth is predicted to be a robust 3.1% this year – up from the 3% posted last year. This is on the back of strong global trade growth of 4% alongside booming capital investment in rich nations. Despite the short-term optimism, the World Bank has raised concerns that, without serious structural reforms, the growth spurt will not last
UK productivity grew at its fastest rate in Q3 2017 in 6 years. This has raised hopes that Britain’s worrying economic trend of stagnating productivity is on the cusp of a reversal. However, analysts note that the boost came from fewer hours worked rather than an output acceleration, as well as the fact that British productivity remains seriously below its pre-crisis trend.
UK inflation was reported to dip to 3% in December, down from 3.1% the month before – raising the hope that the post-Brexit currency-induced inflation is coming to an end. Despite the November rate rise from 0.25% to 0.5%, inflation being consistently over the Bank of England’s 2% target has increased the case for monetary tightening
The German SPD, led by Martin Shulz, has agreed to hold coalition talks with Angela Merkel’s CDU/CSU alliance. This marks a breakthrough since the inconclusive general election in September which failed to produce a majority coalition.
Due to the failure to reach a Senate deal – which required 60 votes – the US Federal government is set for a shutdown. This means that many non-essential Federal services will not be operational until a funding deal is reached. The efforts to reach an agreement last Friday were scuppered by Democrats who insisted on legislation to address the 700,000 ‘Dreamer’ immigrants in the US whose legal status is in question
In a visit to Paris, Theresa May discussed future EU trade relations with President Macron. Whilst he raised the Prime Minister’s hopes of a bespoke trade deal, he insisted that the UK would not be able to maintain Single-Market style services access without adherence to EU rules.