JPM Strategist

The UK economy: A surprisingly strong summer

In the immediate aftermath of the European Union referendum, a number of political and market commentators were forecasting doom and gloom ahead for the UK economy and investors braced themselves for a rocky few months.

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Sep 12, 2016
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However, UK economic data over the summer months has been surprisingly robust. The purchasing managers’ indices for both services and manufacturing jumped to 52.9 and 53.3 respectively in August, well above market expectations. Industrial production in July increased by 2.1% (year on year), also beating expectations.

The chart shows the Citi economic surprise index for the UK, which looks at whether UK economic data is coming in above or below market expectations. The chart shows how impressively the UK economy has defied economist projections over the last couple of months.

Challenging times ahead

Does the recent bounce in economic data mean that the UK economy is out of the woods? The answer is probably not. It will take some time for the full effect of the Brexit vote to be reflected in economic data. Looking at Bank of England (BoE) forecasts provides some insight into what might lie ahead for the UK. The BoE expects business investment to begin to contract in the coming months as firms look to scale back their UK operations gradually over the course of this year.

These expected cutbacks in investment would begin to hurt the consumer in 2017 and 2018 as workers are laid off and unemployment begins to creep back up. As consumers make up 60% of UK GDP, it is likely that it won’t be until 2017 and 2018 that the threat of a pronounced economic slowdown begins to really creep in.

Read more about J.P. Morgan Asset Management’s UK equity fund range:

UK Advisers | UK Asset Managers


For Professional Clients only – not for retail use or distribution. Unless otherwise stated, data is sourced J.P. Morgan Asset Management as at 07.09.2016. Please be aware that this material is for information purposes only. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are, unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. JPMorgan Asset Management Marketing Limited accepts no legal responsibility or liability for any matter or opinion expressed in this material. The value of investments and the income from them can fall as well as rise and investors may not get back the full amount invested. Past performance is not a guide to the future. Issued by JPMorgan Asset Management Marketing Limited which is authorised and regulated in the UK by the Financial Conduct Authority Registered in England No: 288553. Registered address: 25 Bank St, Canary Wharf, London E14 5JP. 0903c02a816e996e

Go to the profile of Alex Dryden

Alex Dryden

Market Strategist, J.P. Morgan Asset Management

Alex Dryden is a global market strategist within J.P. Morgan Asset Management's Global Market Insights Strategy Team. He is responsible for communicating the latest market and economic views in the UK and around Europe.

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