UK business confidence improves

The noise

• Business confidence in the UK rose in the first quarter of 2023, despite data from the British Chambers of Commerce (BCC) showing only a third of firms saw an increase in sales. The data suggested persistently high inflation is heavily influencing consumer spending decisions and adding to costs for companies. 52% of business surveyed by the BCC believed their sales would rise over the next 12 months, up from 44% in the third quarter of 2022. Rising business confidence should be a catalyst for economic growth, and should see improved investment from firms.

• US markets saw a renewed flight to safety, as bond prices climbed following weaker-than-expected economic data. This revived fears that a recession could be in store, as the data indicated a slowdown of the US economy is becoming more apparent. This is further evidenced by Treasury 10-year yield being 1.5 percentage points below the three-month treasury yield. Not only is it the widest margin in decades, but has historically been a reliable signal that the economy is headed for a slowdown.

• London IPOs have slumped to a 14-year low, as the city struggles to attract new listings. Although initial public offerings have declined globally, London has only raised $14 million from three IPOs this year, far behind New York ($3.5 billion) and Europe ($2.15 billion).  

​The numbers

The nuance

This week’s improved consumer confidence has seen the British Pound rise to its highest against the Dollar in 10 months. It also comes as a result of a resilient UK economy, which traders believe may give the Bank of England the ammunition it needs to keeping increasing interest rates. Their efforts to cool inflation are yet to take any real effect, however the same can’t be said across the pond. Weaker-than-estimated economic data in the US has indicated that the Federal Reserve’s tightening cycle is beginning to bite into the economy.

US factory activity contracted by more than analyst expectations, balancing out OPEC+’s surprise plan to cut oil production. The cut in oil production comes after previous assurances that it would hold supply steady for the entirety of 2023. Simple economic reasoning will tell us that a reduction in oil supply will lead to an increase in price, and we saw exactly that as it rallied as much as 8% on Monday. This comes at a particularly frustrating time for central bankers, as additional inflationary pressure is the last thing they need. Higher oil prices will be felt throughout the economy, and may result in more rate hikes states-side.





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