PERSPECTIVES - Arbuthnot Banking Group
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PERSPECTIVES
By Ruth Lea, Economic Adviser to the Arbuthnot Banking Group
The 2019 General Election: the Ruth Lea
Economic Adviser
green light for Brexit Arbuthnot Banking Group
ruthlea@arbuthnot.co.uk
07800 608 674
16th December 2019
Introduction: a decisive Conservative victory…
The Conservative Party won a decisive overall majority of 80 in the General Election of 12
December 2019. The seats won by the Conservatives increased to 365, 47 higher than at the 2017
General Election, whilst the Labour Party won just 203 seats, an overall loss of 59 (see table 1 and
chart 1 below). The LibDems were down one seat to 11, whilst in Scotland the SNP increased their
seats by 13 to 48 (out of 59 Scottish seats). In Northern Ireland, the DUP’s seats fell by two to 8,
whilst the SDLP (Social Democratic and Labour Party) gained two seats and the APNI (Alliance
Party of Northern Ireland) gained one.
After the 2017 General Election the Conservatives’ overall “majority” was minus 14, as the number
of Conservative seats (318) was exceeded by the number of non-Conservative seats (332,
including 7 non-attending Sinn Fein MPs). Note also that the Conservative total in 2017 included
the Speaker and one Deputy Speaker, whilst the Labour total included two Deputy Speakers. After
the 2019 election the Conservative total (including two Deputy Speakers) of 365 exceeds the
number of non-Conservative seats (including the Speaker and one Deputy Speaker) of 285 by a
very substantial 80. Again, the non-Conservative total includes 7 non-attending Sinn Fein MPs.
1Table 1 House of Commons, General Election results: 2017 and 2019
2017 General 2019 General Change
Election Election
results results
Total 650 650 0
Conservative 318 365 +47
Labour 262 203 -59
SNP 35 48 +13
Liberal Democrat 12 11 -1
DUP 10 8 -2
Sinn Fein 7 7 0
Plaid Cymru 4 4 0
SDLP 0 2 2
APNI 0 1 1
Green Party 1 1 0
Independent (Northern Ireland) 1 0 -1
Non-Conservative total 650-318 = 332 650-365=285 …
Conservative overall majority 318-332 = -14 365-285=80 …
Chart 1 UK 2019 General Election results (seats): number won and change since 2017 General
Election
400
350
300
250
200
150
100
50
0
-50
-100
Conservative Labour LibDem SNP DUP Sinn Fein Other
Seats 365 203 11 48 8 7 6
Change 47 -59 -1 13 -2 0 2
Sources: (i) BBC, “Election 2019: results”, December 2019; (ii) BBC, “Election 2017: results”, June
2017. The Conservative & Labour data include the Speaker & Deputy Speakers.
2…enabled by swings in the Midlands, the North and Wales
Suffice to say, the General Election was marked, in particular, by a very substantial swing in seats
from the Labour Party to the Conservatives. Moreover, the swing had a very marked regional
pattern. Charts 2a and 2b below, and annex tables 1 and 2a-2c, cover the 2019 outcome and the
changes since the 2017 election by region/country.
The main features, focussing on the Conservative-Labour changes, were:
• In London, the overall (net) numbers of both Conservative and Labour seats were unchanged.
• In the South East, East of England and the South West, there were modest gains by the
Conservatives and modest losses by the Labour Party. But note that the majority of seats in
these regions were already held by the Conservatives.
• In the Midlands (West Midlands and East Midlands) a total of 16 seats switched from Labour to
Conservative, whilst in the North (the North West, Yorkshire and Humberside and the North
East) a total of 28 seats switched from Labour to Conservative.
• In Wales, six seats switched from Labour to the Conservatives.
• Note that the both the Conservatives and the Labour Party lost seats in Scotland, with the SNP
as beneficiary - by seven and six respectively.
Chart 2a Conservative seats in 2019 (and change since 2017), English regions, Wales, Scotland
80
70
60
50
40
30
20
10
0
-10
-20
South South West East North Yorks & North Scot-
London East Wales
East West Mids Mids West Humber East land
Seats 21 74 52 48 44 38 32 26 10 14 6
Change 0 1 2 1 9 7 12 9 7 6 -7
3Chart 2b Labour seats in 2019 (and change since 2017), English regions, Wales, Scotland
60
50
40
30
20
10
0
-10
-20
South South West East North Yorks & North Scot-
London East Wales
East West Mids Mids West Humber East land
Seats 49 8 5 6 15 8 42 28 19 22 1
Change 0 0 -2 -1 -9 -7 -12 -9 -7 -6 -6
Sources: (i) BBC, “Election 2019: results”, December 2019; (ii) BBC, “Election 2017: results”, June
2017. See annex tables 1, 2a-2c.
Political developments: Brexit is the priority
In the wake of the 2019 General Election, imminent developments are (see annex table 3 for key
dates):1
• MPs return to Parliament on 17 December.
• The Queen will formally open Parliament on 19 December, but with “reduced ceremonial
elements”. The last State Opening was on 14 October.2-3
• In addition, there is speculation the Prime Minister may announce a (modest) reshuffle to his
ministerial team at the beginning of this week. A more fundamental reshuffle could be in store
after Brexit Day, 31 January 2020.
Concerning policy, the government’s priority is clearly “getting Brexit done”. The Conservative
manifesto committed the government to begin the process of passing the European Union
(Withdrawal Agreement) Bill, initially introduced on 21 October, through the House of Commons
before the Christmas recess, to ensure the Bill’s passage through the Commons and the Lords is
complete before the Article 50 deadline on 31 January 2020. The purpose of the Bill is to turn the
Withdrawal Agreement, the draft international treaty agreed by the UK Government and the EU
on 17 October, into UK law and to give the Government permission to ratify it.4-5 The European
Parliament’s ratification of the Withdrawal Agreement is expected to be a formality.
The Bill’s passage through the UK Parliament is no longer in doubt (surely). With a large majority
and, for now, a party united on Brexit, the Conservatives should be able to pass the Bill, seeing off
any hostile amendments tabled by opposition parties or the House of Lords. The General Election
4result has given the green light for Brexit.
Looking further ahead, and assuming Brexit is on 31 January, the UK will enter the transition
period on 1 February 2020. Negotiations on the future UK-EU relationship, as outlined in the
revised Political Declaration on the future relationship, will then begin in earnest.6 One of the
biggest milestones in the negotiations will be on 30 June 2020, which is the deadline for the UK
and EU to agree on any extension to the transition period. But note the Conservative manifesto
ruled out any extension beyond December 2020.7 Suffice to say at this point, if the UK and EU do
not extend the transition period and then fail to conclude a deal on the future relationship by
December 2020, the legal default would be a WTO terms relationship, post December 2020.
Brexit, priority though it is, is far from being the only matter in the government’s in-tray. A Budget
is expected in February 2020. The original date of 6 November was cancelled because of the
General Election.
5Footnote: sterling bounced after the General Election
The financial markets reacted favourably to the Conservative victory, with a lift in sterling rates
against major currencies on 13 December, as shown in chart 3. It should also be noted that the
pound had been firmer in the run-up to the General Election on the expectation of Conservative
success. Stocks also benefited from a post-election bounce.8
Chart 3 £/$, £/€: daily rates: 1 November 2019-13 December 2019
1.35
£/$
1.3
1.25
£/€
1.2
1.15
1.1
1.05
01-Nov
03-Nov
05-Nov
07-Nov
09-Nov
11-Nov
13-Nov
15-Nov
17-Nov
19-Nov
21-Nov
23-Nov
25-Nov
27-Nov
29-Nov
01-Dec
03-Dec
05-Dec
07-Dec
09-Dec
11-Dec
13-Dec
£/$ £/€
Sources: (i) Bank of England database (spot rates) for data to 11 December; (ii) BBC website for 12-
13 December.
UK economic update: slowing growth…
Recent data have confirmed underlying growth is slowing (see annex table 4 for the economic
data tracker).9
GDP was flat (MOM) in October, after falls of 0.2% in August and 0.1% in September. It was just
0.7% (YOY) higher. There was growth in services (0.2%, MOM) and production (0.1%, MOM), but
this was offset by a notable fall in construction (2.3%, MOM), which was at its lowest level of
output since January 2018.10-13 The monthly growth rate for GDP is volatile and so it should be
used with caution and alongside other measures, such as the three-month growth rate, when
looking for an indicator of the longer-term trend of the economy. However, it is useful in
highlighting one-off changes that can be masked by three-month growth rates.
Turning to the data for the three months to October, GDP was also flat (QOQ), to be 0.8% higher
than a year earlier. The services sector was the only positive contributor to GDP growth (up just
0.2%, QOQ), whilst the production sector fell by 0.7% (QOQ) and construction output fell by 0.3%
(QOQ).
6NIESR have revised their GDP growth estimate for 2019Q4 to just 0.1% (QOQ), from the previous
0.2%.14 If GDP did increase by 0.1% in 2019Q4 the GDP growth for the year would be, ceteris
paribus, 1.25% (YOY), compared with 1.4% in 2018.
The Markit surveys weakened, on balance, in November, with manufacturing and services
deteriorating but construction picking up a tad. They all suggested declining output.15-17 Markit’s
UK composite PMI slipped to 49.3 in November, down from 50.0 (revised) in October, signalling a
marginal reduction in private sector output. Markit commented “…lower manufacturing
production alongside an absence of growth in the service economy means that the IHS
Markit/CIPS Composite Output Index is consistent with UK GDP declining at a quarterly rate of
around 0.1%”.
…and weaker trade data at face value
The total trade (goods & services) deficit widened to £7.2bn in the 3 months to October,
compared with a deficit of £4.8bn in the 3 months to July, as imports grew faster than exports.18
But, if “unspecified goods” (including non-monetary gold (NMG)) are excluded, the deficit
narrowed to £2.9bn in the 3 months to October 2019. Excluding “unspecified goods”, a volatile
component, probably gives a better picture of underlying trends.
Taking the total trade balance, and removing the effect of inflation, the deficit (in volume terms)
widened £1.1bn to £4.4bn in the 3 months to October. This would act as a drag on constant price
GDP growth, other things being equal.19
Central Bank watch: no change from the Fed…
As expected the Federal Reserve held interest rates steady following its two-day meeting ending
11 December (see annex table 5, Central Bank watch) and indicated that no action was likely next
year amid persistently low inflation.20-21 The target range for the federal funds rate remained at
1.50%-1.75% (1.6%), as agreed in October. The decision to keep rates unchanged was unanimous,
following several dissents in recent meetings.
The Fed’s statement stated “…the Committee judges that the current stance of monetary policy is
appropriate to support sustained expansion of economic activity, strong labour market conditions,
and inflation near the Committee’s symmetric 2%”. The statement added “…the Committee will
continue to monitor the implications of incoming information for the economic outlook, including
global developments and muted inflation pressures, as it assesses the appropriate path of the
target range for the federal funds rate.”
There were very few changes to the economic forecasts (annex table 6) compared with
September. The GDP growth forecast was unchanged to be 2.2% in 2019, 2.0% in 2020, 1.9% in
2021 and 1.8% in 2022, whilst the inflation forecasts were also unchanged: 1.5% in 2019, 1.9% in
2020, 2.0% in 2021 and 2.0% in 2022. However, the unemployment rate projections were shaved
down to 3.6% in 2019 (3.7% in September), 3.5% in 2020 (3.7%), 3.6% in 2021 (3.8%) and 3.7% in
2022 (3.9%). These downward revisions reflect the strong performance of the labour market in
recent months. Specifically, non-farm payrolls rose a better-than-expected 266,000 jobs in
7November, while the unemployment rate dipped to 3.5% from 3.6%.22 Employment growth was
helped by striking GM workers returning to work and a big rise in healthcare posts. GDP growth
was 2.1% (annualised) in 2019Q3.23
The Fed’s projected outlook for US interest rates has changed significantly in recent quarters, as
shown in chart 4. In September 2018, there were expectations that the Fed funds rate would rise
to over 3% by end-2019 and increase further by end-2020. The end-year 2019 rate is now 1.6%,
the current level of Fed funds, and projected to stay at this rate in 2020, with relatively modest
rises in 2021 and 2022.
Chart 4 Federal Reserve: projections for Fed funds rate (median estimates), end-year, Sep 2018-
Dec 2019
4
3.4 3.4
3.5
3.1 3.1 3.1
3
2.9
3 2.8
2.6 2.6
2.5 2.5 2.5 2.5
2.4 2.4 2.4 2.4
2.5
2.1 2.1 2.1
1.9 1.9 1.9
2
1.6 1.6
1.5
1
0.5
0
2019 2020 2021 2022 Longer run
Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19
Source: Federal Reserve, “Federal Reserve Board and Federal Open Market Committee release
economic projections from the December 10-12 FOMC meeting”, 11 December 2019, and earlier
notes. These are the economic projections of Federal Reserve Board members & Federal Reserve
Bank presidents under their individual assessments of projected appropriate monetary policy.
…and no change from the ECB…
Policy was also left unchanged at the latest monetary policy meeting of Governing Council of the
ECB (see Central Bank watch, annex table 5):24-25
• The interest rate on the main refinancing operations and the interest rates on the marginal
lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50%
respectively.
• Moreover, “…the Governing Council expects the key ECB interest rates to remain at their
present or lower levels until it has seen the inflation outlook robustly converge to a level
sufficiently close to, but below, 2% within its projection horizon, and such convergence has
been consistently reflected in underlying inflation dynamics”.
• On 1 November net purchases were restarted under the Governing Council’s asset purchase
programme (APP) at a monthly pace of €20bn. The Governing Council “…expects them to run
8for as long as necessary to reinforce the accommodative impact of its policy rates, and to end
shortly before it starts raising the key ECB interest rates”.
Christine Lagarde made her debut as ECB President at the ECB’s latest monetary policy press
conference on 12 December 2019, showing continuity with her predecessor.26 She commented
“…in the light of the subdued inflation outlook, the Governing Council reiterated the need for
monetary policy to remain highly accommodative for a prolonged period of time”. Moreover,
“…the risks surrounding the euro area growth outlook, related to geopolitical factors, rising
protectionism and vulnerabilities in emerging markets, remain tilted to the downside, but have
become somewhat less pronounced”. President Lagarde also discussed the ECB’s latest strategic
review, the first since 2003, due to be completed before the end of 2020. The ECB’s mandate of
maintaining price stability “will be core and centre to our strategic review.”
The ECB’s latest macroeconomic projections were little changed compared with September’s
(charts 5a and 5b and annex table 7).27 GDP growth was forecast to be 1.2% in 2019 (1.1% in
September), 1.1% in 2020 (1.2%) and 1.4% in 2021 (unchanged). By any standards, these are
lacklustre expectations. The ECB explained “…following weak growth in 2019Q2 and 2019Q3, real
GDP growth is expected to remain subdued in the near term. Economic sentiment indicators have
declined, mainly reflecting the ongoing weakness in global trade in an environment of continued
global uncertainties (related to increased protectionism, a potential sharper slowdown in China
and a no-deal Brexit).”
Concerning consumer price inflation, the ECB’s projection were 1.2% in 2019 (unchanged), 1.1% in
2020 (1.0% in September) and 1.4% in 2021 (1.5% in September). It is clear that the ECB believes
that HICP inflation will remain significantly below the 2% target over the forecast period,
reinforcing the view that monetary policy will remain very accommodative for some years to
come.
Chart 5a ECB forecasts for GDP growth (%): Mar 2019-Dec 2019
1.8
1.6
1.6 1.5
1.4 1.4 1.4 1.4
1.4
1.2 1.2 1.2
1.2 1.1 1.1 1.1
1
0.8
0.6
0.4
0.2
0
2019 2020 2021
Mar-19 Jun-19 Sep-19 Dec-19
9Chart 5b ECB forecasts for HICP inflation (%): Mar 2019-Dec 2019
1.8
1.6 1.6
1.6 1.5 1.5
1.4 1.4
1.4 1.3
1.2 1.2 1.2
1.2 1.1
1
1
0.8
0.6
0.4
0.2
0
2019 2020 2021
Mar-19 Jun-19 Sep-19 Dec-19
Sources: ECB, “Eurosystem staff macroeconomic projections for the euro area”, 12 December
2019 and earlier editions. See also annex table 3.
HICP=harmonised index of consumer prices.
…and no change expected from the Bank of England next week
The policy decision of the next meeting of the Monetary Policy Committee (MPC) will be
announced on 19 December 2019. No change in policy is expected.
Governor Mark Carney’s term of office ends on 31 January 2020. His successor has not yet been
announced.
10References
1. BBC, “What’s going to happen before Christmas?”, 13 December 2019.
2. Ruth Lea, “The IMF downgrades global growth again for 2019, slowest pace since the financial
crisis”, Arbuthnot Banking Group, 21 October 2019, discussed the Queen’s Speech of 14
October.
3. Conservative Home, “The full list of 22 Bills from today’s Queen’s Speech”, 14 October 2019.
4. Ruth Lea, “The UK as a place to do business: still very highly regarded internationally”,
Arbuthnot Banking Group, 4 November 2019, discussed the European Union (Withdrawal
Agreement) Bill.
5. BBC, “What is the Withdrawal Agreement Bill?”, 22 October 2019.
6. Ruth Lea, “The IMF downgrades global growth again for 2019, slowest pace since the financial
crisis”, Arbuthnot Banking Group, 21 October 2019, discussed the revised Political Declaration
as well as the revised Withdrawal Agreement.
7. Open Europe, “What does the Conservative election victory mean for Brexit?”, 13 December
2019.
8. BBC, “General election 2019: Pound and shares surge”, 13 December 2019.
9. Ruth Lea, “The 2019 General Election: clear blue water between the two main parties”,
Arbuthnot Banking Group, 2 December 2019, has the last data tracker.
10. ONS, “GDP monthly estimate, UK: October 2019”, 10 December 2019.
11. ONS, “Index of services, UK: October 2019”, 10 December 2019.
12. ONS, “Index of production, UK: October 2019”, 10 December 2019.
13. ONS, “Construction, GB: October 2019”, 10 December 2019.
14. NIESR, “Monthly GDP tracker – growth petering out at end of year”, 10 December 2019.
15. Markit/CIPS manufacturing PMI, “UK manufacturing contracts as political & economic
uncertainty continues”, 2 December 2019. The manufacturing PMI slipped to 48.9 in
November, compared with October’s 49.6, remaining below the neutral 50.0 mark separating
contraction from expansion.
16. Markit/CIPS construction PMI, “Slowest decline in construction output since July”, 3 December
2019. The construction PMI rose to 45.3 in November, compared with 44.2 in October, but still
below the neutral 50.0 mark.
17. Markit/CIPS services PMI, “Renewed decline in service sector activity”, 4 December 2019. The
services PMI slipped to 49.3 in November, down from 50.00 in October, and just below the
neutral 50.00 mark.
18. ONS, “UK trade: October 2019”, 10 December 2019.
19. Note the equal and offsetting impacts on “net acquisition of valuables” and on the trade
balance of movements of non-monetary gold (NMG).
20. Federal Reserve, “Federal Reserve issues FOMC statement”, 11 December 2019.
21. CNBC, “Fed Decision: Interest rates left unchanged, indicates no changes through 2020”, 11
December 2019.
22. BBC, “US jobs growth jumps in November”, 6 December 2019.
23. FT, “US GDP growth revised up to 2.1% pace in third quarter”, 27 November 2019. The
advance estimate was for 1.9% growth in 2019Q3.
24. ECB, “Monetary policy decisions”, 12 December 2019.
25. Ruth Lea, “July’s better-than-expected GDP data suggest economy not slipping into recession”,
Arbuthnot Banking Group, 23 September 2019, discussed the ECB’s September 2019 package
of stimulatory monetary measures.
26. ECB, “Introductory statement by Christine Lagarde: press conference”, 12 December 2019.
27. ECB, “Eurosystem staff macroeconomic projections for the euro area”, 12 December 2019.
11Annex
Table 1 House of Commons, General Election results (2017, 2019)
Conservative+ Labour++ SNP LibDem DUP Sin Other Totals
Fein
2017
England:
London 21 49 0 3 0 0 0 73
South East 73 (inc. 8 0 2 0 0 1 84
Speaker) Green
East 50 7 0 1 0 0 0 58
South West 47 7 0 1 0 0 0 55
West 35 24 0 0 0 0 0 59
Midlands
East 31 15 0 0 0 0 0 46
Midlands
North West 20 54 0 1 0 0 0 75
Yorks & 17 37 0 0 0 0 0 54
Humberside
North East 3 26 0 0 0 0 0 29
Total 297 227 0 8 0 0 1 533
England Green
Wales 8 28 0 0 0 0 4 PC 40
Scotland 13 7 35 4 0 0 0 59
Northern 0 0 0 0 10 7 1 Ind. 18
Ireland
UK 318 (inc. 262 35 12 10 7 6 650
Speaker)
2019
(change in
brackets)
England:
London 21 (0) 49 (0) 0 3 (0) 0 0 0 73
South East 74 (1) 8 (0) 0 1 (-1) 0 0 1 84
Green
(0)
East 52 (+2) 5 (-2) 0 1 (0) 0 0 0 58
South West 48 (+1) 6 (-1) 0 1 (0) 0 0 0 55
West 44 (+9) 15 (-9) 0 0 0 0 0 59
Midlands
East 38 (+7) 8 (-7) 0 0 0 0 0 46
Midlands
North West 32 (+12) 42 (inc. 0 1 (0) 0 0 0 75
Speaker) (-
12)
Yorks & 26 (+9) 28 (-9) 0 0 0 0 0 54
12Humberside
North East 10 (+7) 19 (-7) 0 0 0 0 0 29
Total 345 (+48) 180 (-47) 0 7 (-1) 0 0 1 533
England Green
(0)
Wales 14 (+6) 22 (-6) 0 0 0 0 4 PC 40
(0)
Scotland 6 (-7) 1 (-6) 48 4 (0) 0 0 0 59
(+13)
Northern 0 0 0 0 8 (-2) 7 (0) 2 SDLP 18
Ireland (+2), 1
APNI
(+1), 0
Ind. (-
1)
UK 365 (+47) 203 (inc. 48 11 (-1) 8 (-2) 7 (0) 8 (+2) 650
Speaker) (- (+13)
59)
Sources: (i) BBC, “Election 2019: results”, December 2019; (ii) BBC, “Election 2017: results”, June
2017.
+ 2017 Conservative total includes Speaker & one Deputy Speaker; 2019 Conservative total
includes 2 Deputy Speakers (one vacant).
++ 2017 Labour total includes 2 Deputy Speakers; 2019 Labour total includes Speaker & one
Deputy Speaker.
Table 2a General Election results 2019, gains, net gains, by party: England and Wales
Conservative gains Labour gains LibDem gains
England:
London 1 from Lab; 1 from LibDem 1 from Con 1 from Com
Net = 0 Net = 0 Net = 0
South East 1 from LibDem
Net = +1 … Net = -1
East 2 from Lab; 1 from LibDem 1 from Con
Net = +2 Net = -2 Net = 0
South West 1 from Lab
Net = +1 Net = -1 …
West Midlands 9 from Lab
Net = +9 Net = -9 …
East Midlands 7 from Lab
Net = +7 Net = -7 …
North West 12 from Lab
13Net = +12 Net = -12 …
Yorks & Humber 9 from Lab
Net = +9 Net = -9 …
North East 7 from Lab
Net = +7 Net = -7 …
Wales 6 from Lab
Net = +6 Net = -6 … (since 2017
GE)
Table 2b General Election results 2019, gains, net gains, by party: Scotland
SNP gains Conservative Labour gains LibDem
gains gains
7 from Con; 6 from Lab; 1 from 1 from SNP
LibDem
Net = +13 Net = -7 Net = -6 Net = 0
Table 2c General Election results 2019, gains, net gains, by party: Northern Ireland
DUP gains SDLP gains APNI gains Independent Sinn Fein
1 from DUP; 1 from SF 1 from Independent 1 from DUP
Net = -2 Net = +2 Net = +1 Net = -1 Net = 0
Sources: (i) BBC, “Election 2019: results”, December 2019; (ii) BBC, “Election 2017: results”, June
2017.
There were no changes to seats held by the Green Party and Plaid Cymru.
Table 3 Brexit: key dates from mid-October 2019
Date Event
2019
14 October 2019 Queen’s Speech, proposed (last Queen’s Speech, 21 June 2017)
17 October 2019 UK Government and Commission agreed revised Protocol on Ireland/Northern
Ireland and revised Political Declaration
21 October 2019 Government published European Union (Withdrawal Agreement) Bill.
28 October 2019 EU27 officially agree to “flextension” to 31 January 2020. PM agrees.
31 October 2019 “Brexit Day”, as agreed on 10 April 2019, cancelled
6 November 2019 UK Parliament dissolved. Elections campaigns under way: Labour (31 October),
LibDems (5 November), Conservatives (6 November)
1 December 2019 New President of the European Council (Charles Michel)
1 December 2019 New European Commission (President Ursula von der Leyen).
1412 December 2019 UK General Election: Conservatives 80 majority
17 December 2019 Parliament returns
19 December 2019 State Opening of Parliament
Before Christmas? European Union (Withdrawal Agreement) Bill returns to Commons
2020
Late 2019/early European Union (Withdrawal Agreement) Bill expected to pass
2020
Mid/late January European Parliament expected to ratify Withdrawal Agreement
2020
31 January 2020 Brexit Day
1 February 2020 Start of transition period
7 May 2020 Local elections, London Mayoral election
18-19 June 2020 European Council meeting
30 June 2020 Deadline for extending transition period
15-16 October European Council meeting
2020
10-11 December European Council meeting
2020
31 December 2020 End of transition period, unless extension
2021
1 January 2021 Start of new UK-EU relationship. FTA? WTO rules?
Sources include: Open Europe, “What does the Conservative election victory mean for Brexit?”, 13
December 2019.
Table 4 UK economic data tracker
Date Release Source Quarter, Outcome
year
13 Sep Index of labour costs per ONS 2019Q2 +3.4% (YOY)
hour (2019Q2)
30 Sep Current Account, Balance ONS 2019Q2 Deficit: £25.2bn (4.6% of GDP),
of Payments (2019Q2): £33.1bn (6.0% of GDP, 2019Q1)
30 Sep Trade (goods & services) ONS 2019Q2 Deficit: £11.4bn (2019Q2), £22.7bn
balance: (2019Q1)
30 Sep • Visible trade ONS 2019Q2 Deficit: £34.1bn (2019Q2), £48.1bn
balance (2019Q1)
30 Sep • Services balance ONS 2019Q2 Surplus: £22.7bn (2019Q2), £25.3bn
(2019Q1)
30 Sep Primary income balance ONS 2019Q2 Deficit: £7.1bn (2019Q2), £3.4bn
(2019Q1)
30 Sep Secondary income balance ONS 2019Q2 Deficit: £6.7bn (2019Q2), £6.9bn
15(2019Q1)
30 Sep GDP, quarterly, 2019Q2, ONS 2019Q2 GDP: -0.2% (QOQ), 1.3% (YOY)
revised
30 Sep GDP: industrial breakdown ONS 2019Q2 Production: -1.8% (QOQ);
(2019Q2) Manufacturing output: -2.8% (QOQ);
Construction: -1.2% (QOQ); Services:
0.1% (QOQ)
30 Sep GDP: expenditure ONS 2019Q2 Household consumption: 0.4%
breakdown (2019Q2) (QOQ); GGFC: 1.1% (QOQ); GFCF: -
0.9% (QOQ), within which business
investment -0.4% (QOQ).
Inventories: -£0.7bn (2019Q2),
+£5.5bn (2019Q1). Net contribution
of net trade (KP): +£12.8bn. Exports
-6.6% (QOQ), imports -13.0% (QOQ)
12 Nov Employment (3 months to ONS 2019Q3 -58k (QOQ), +323k (YOY)
Sep)
12 Nov Unemployment (3 months ONS 2019Q3 -23k (QOQ), -72k (YOY)
to Sep)
12 Nov Unemployment rate (3 ONS 2019Q3 3.8%; 4.0% (2018Q3)
months to Sep)
12 Nov Vacancies (3 months to ONS 2019Q4 Total vacancies: 800k, -18k (QOQ), -
Oct) 53k (YOY)
12 Nov Earnings (3 months to ONS 2019Q3 3.6% (YOY, total pay, including
Sep), nominal bonuses),
3.6% (YOY, regular pay, excluding
bonuses)
12 Nov Earnings (3 months to ONS 2019Q3 1.8% (YOY, total pay, including
Sep), real bonuses),
1.7% (YOY, regular pay, excluding
bonuses)
12 Nov Productivity (output per ONS 2019Q3 0.3% (QOQ), flat (YOY)
hour), flash, (2019Q3)
12 Nov Productivity (output per ONS 2019Q3 0.5% (QOQ), flat (YOY)
job), flash, (2019Q3)
13 Nov CPIH (Oct) ONS 2019Q4 YOY inflation: 1.5% (Oct), 1.7% (Sep)
13 Nov CPI (Oct) ONS 2019Q4 YOY inflation: 1.5% (Oct), 1.7% (Sep)
13 Nov PPI (output) (Oct) ONS 2019Q4 YOY inflation: 0.4% (Oct), 1.2% (Sep)
13 Nov PPI (input) (Oct) ONS 2019Q4 YOY inflation: -5.1% (YOY), -3.0%
(Sep)
13 Nov Crude oil prices (Oct) ONS 2019Q4 -5.3% (MOM), -22.9% (YOY)
13 Nov Sterling effective exchange ONS 2019Q4 +2.2% (MOM), -0.4% (YOY)
rate index (ERI) (Oct)
13 Nov House prices (Sep, official) ONS 2019Q3 YOY growth: 1.3% (Sep), 1.3% (Aug)
13 Nov House prices (Sep, official) ONS 2019Q3 -0.2% (MOM, non-seasonally
adjusted),
+0.2% (MOM, seasonally adjusted)
14 Nov Retail sales (Oct) ONS 2019Q4 Volume: -0.1% (MOM), 3.1% (YOY)
1614 Nov Retail sales (3 months to ONS 2019Q4 Volume: +0.2% (QOQ), 2.9% (YOY)
Oct)
21 Nov Public Sector Net ONS 2019Q4 £11.2bn (Oct 2019), compared with
Borrowing (PSNB) (Oct) £8.9bn (Oct 2018)
21 Nov Public Sector Net ONS FY2019 £46.3bn deficit (Apr-Oct 2019),
Borrowing (PSNB) (FY2019, compared with £42.0bn deficit (Apr-
year-to-date) Oct 2018)
21 Nov Public sector finances, ONS 2019Q4 £1,798.5bn (end-Oct 2019, 80.4% of
public sector net debt GDP), compared with £1,766.4bn
(PSND) (end-Oct) (end-Oct 2018, 81.5% of GDP)
29 Nov Unsecured credit (Oct) BoE 2019Q4 Growth rate (YOY): 6.1% (Oct), 5.9%
(Sep), 6.1% (Aug)
29 Nov Net mortgage borrowing BoE 2019Q4 Growth rate (YOY): 3.2% (Oct), 3.2%
(Oct) (Sep)
29 Nov Mortgage approvals for BoE 2019Q4 64,600 (Oct), 65,800 (Sep), 66,100
house purchase (Oct) (6-month average)
29 Nov Net bank lending to non- BoE 2019Q4 Growth rate (YOY): 3.8% (Oct), 4.0%
financial businesses (Oct), (Sep)
of which:
29 Nov • SMEs BoE 2019Q4 Growth rate (YOY): 1.0% (Oct), 1.1%
(Sep)
29 Nov • Large businesses BoE 2019Q4 Growth rate (YOY): 5.3% (Oct), 5.5%
(Sep)
2 Dec Manufacturing PMI (Nov) Markit- 2019Q4 Index: 48.9 (Nov), 49.6 (Oct)
CIPS
3 Dec Construction PMI (Nov) Markit- 2019Q4 Index: 45.3 (Nov), 44.2 (Oct)
CIPS
4 Dec Services PMI (Nov) Markit- 2019Q4 Index: 49.3 (Nov), 50.00 (Oct)
CIPS
4 Dec All sector PMI (Nov) Markit- 2019Q4 Index: 49.3 (Nov), 50.0 (Oct)
CIPS
10 Dec GDP, monthly (Oct) ONS 2019Q4 GDP: flat (MOM), 0.7% (YOY)
10 Dec GDP: industrial breakdown ONS 2019Q4 Production: 0.1% (MOM);
(Oct) Manufacturing output: 0.2% (MOM);
Construction: -2.3% (MOM);
Services: 0.2% (MOM)
10 Dec GDP, quarterly (3 months ONS 2019Q4 GDP: flat (QOQ), 0.8% (YOY)
to Oct)
10 Dec GDP: industrial breakdown ONS 2019Q4 Production: -0.7% (QOQ);
(3 months to Oct) Manufacturing output: -0.7% (QOQ);
Construction: -0.3% (QOQ); Services:
+0.2% (QOQ)
10 Dec NIESR GDP tracker NIESR 2019Q4 GDP change: 0.3% (QOQ) in 2019Q3,
+0.1% (QOQ) in 2019Q4.
10 Dec UK trade in goods & ONS 2019Q4 Trade deficit: £7.2bn (3 months to
services (3 months to Oct) October), £4.8bn (3 months to July)
10 Dec UK trade in goods (3 ONS 2019Q4 Goods deficit: £35.6bn (3 months to
months to Oct) October), £28.8bn (3 months to July)
1710 Dec UK trade in services (3 ONS 2019Q4 Services surplus: £28.4bn (3 months
months to Oct) to October), £23.9bn (3 months to
July)
Table 5 Central Bank watch
Central Monetary policy Monetary policy Recent monetary policy history
Bank setting committee meetings for 2019
& 2020
Bank of Monetary Policy Announcements Bank Rate (base rate): 0.5% (5/3/09);
England Committee (MPC) (2019): 7 Feb; 21 interest rate BoE 0.25% (4/8/16);
(BoE). sets monetary March; 2 May; 20 charges commercial 0.5% (2/11/17);
policy, including June; 1 Aug; 19 banks for secured 0.75% (2/8/18)
Bank Rate Sep; 7 Nov; 19 Dec. overnight lending.
Governor The Inflation Report, Announcements
Mark with forecasts, is (2020): 30 Jan; 26
Carney released in Feb March; 7 May; 18
(Jan), May, Aug & June; 6 Aug; 17
Nov. Sep; 5 Nov; 17 Dec.
Objective of
monetary policy: to
achieve
Government’s target
of inflation at 2% in
the medium term.
European Governing Council Announcements Main refinancing 0.0% (16/3/16)
Central sets monetary (2019): 24 Jan; 7 operations (MRO)
Bank policy, including 3 March; 10 April; 6 interest rate, which
(ECB). key interest rates: June; 25 July; 12 provide the bulk of
Main refinancing Sep; 24 Oct; 12 liquidity to the
operations, Deposit Dec. banking system
facility rate, &
Marginal lending
facility rate.
ECB Forecasts: Announcements Deposit facility rate, -0.40% (16/3/16);
President • Mar, Sep (2020): 23 Jan; 12 which banks may use -0.50% (12/9/19)
Christine (ECB staff. March; 30 April; 4 to make overnight
Lagarde members). June; 16 July; 10 deposits with
• Jun, Dec Sep; 29 Oct; 10 Eurosystem
(Eurozone Dec. [comprises ECB & 19
national central banks of
central banks Eurozone members]
& ECB staff
members).
Primary objective of Marginal lending 0.25% (16/3/16)
18monetary policy: to facility rate (MLR),
maintain price which offers
stability. ECB aims at overnight credit to
inflation rates of banks from
below, but close to, Eurosystem
2% over the medium
term.
Non-standard Monthly pace of
monetary policy €20bn as from 1
measures: net November
purchases under asset (announced
purchase programme 12/9/19)
(APP).
Federal Federal Open Meetings (2019): Federal funds rate: 0-0.25%
Reserve Market Committee 29-30 Jan; 19-20 rate banks charge (16/12/08);
System (FOMC) sets March; 30 April-1 each other for 0.25-0.50%
(Federal monetary policy, by May; 18-19 June; overnight loans of (17/12/15);
Reserve, targeting the federal 30-31 July; 17-18 federal funds 0.50-0.25%
the Fed). funds rate. Sep; 29-30 Oct; 10- (reserves held by (14/12/16);
11 Dec. banks at the Fed), set 0.75-1.00%
by the market. Note (15/3/17);
the discount rate is 1.00-1.25%
the rate for “discount (14/6/17);
window lending” 1.25-1.50%
(overnight loans (13/12/17);
member banks 1.50-1.75%
borrow directly from (21/3/18);
the Fed). 1.75-2.00%
(13/6/18);
2.00-2.25%
(26/9/18);
2.25-2.50%
(19/12/18);
2.00-2.25%
(31/7/19);
1.75-2.00%
(18/9/19);
1.50-1.75%
(30/10/19)
Fed Chair March, June, Sep, Meetings (2020): Fed’s end-year 2019: 1.9%; 2020:
Jerome Dec meetings with 28-29 Jan; 17-18 projections for the 1.9%; 2021: 2.1%;
(Jay) Summary of March; 28-29 April; federal funds rate 2022: 2.4%;
Powell Economic 9-10 June; 28-29 (Sep 2019) Longer-run: 2.5%.
Projections & press July; 15-16 Sep; 4-5
conference Nov; 15-16 Dec.
Objectives of
monetary policy:
promoting (1)
19maximum
employment (no
fixed goal), (2) stable
prices (around 2%).
Sources: (i) Bank of England website; (ii) ECB website; (iii) Federal Reserve System website
Table 6 Federal Reserve: economic projections December 2019, median estimates
2019 2020 2021 2022 Longer-
run
GDP % change, Q4 (YOY):
Sep 2019 2.2 2.0 1.9 1.8 1.9
Dec 2019 2.2 2.0 1.9 1.8 1.9
Unemployment rate, Q4 (%):
Sep 2019 3.7 3.7 3.8 3.9 4.2
Dec 2019 3.6 3.5 3.6 3.7 4.1
PCE inflation (%), Q4 (YOY):
Sep 2019 1.5 1.9 2.0 2.0 2.0
Dec 2019 1.5 1.9 2.0 2.0 2.0
Core PCE inflation (%), Q4
(YOY):
Sep 2019 1.8 1.9 2.0 2.0 Na
Dec 2019 1.6 1.9 2.0 2.0 Na
Projected appropriate policy
path, Federal funds rate (%),
end-year:
Sep 2019 1.9% 1.9% 2.1% 2.4% 2.5%
(1.75%- (1.75%- (2.00%- (2.25%-
2.00%) 2.00%) 2.25%) 2.50%)
Dec 2019 1.6% 1.6% 1.9% 2.1% 2.5%
(1.50%- (1.50%- (1.75%- (2.00%-
1.75%) 1.75%) 2.00%) 2.25%)
Source: Federal Reserve, “Federal Reserve Board and Federal Open Market Committee release
economic projections from the December 10-11 FOMC meeting”, 11 December 2019.
PCE = personal consumption expenditures, core excludes food & energy. The Federal funds rate is
the midpoint of the targeted range.
These are the economic projections of Federal Reserve Board members & Federal Reserve Bank
presidents under their individual assessments of projected appropriate monetary policy.
20Table 7 ECB forecasts for GDP growth (%) & consumer prices inflation (%): Mar 2019-Dec 2019
December 2019 September 2019 June 2019 March 2019
2019 2020 2021 2019 2020 2021 2019 2020 2021 2019 2020 2021
GDP 1.2 1.1 1.4 1.1 1.2 1.4 1.2 1.4 1.4 1.1 1.6 1.5
CPI 1.2 1.1 1.4 1.2 1.0 1.5 1.3 1.4 1.6 1.2 1.5 1.6
Sources: ECB, “Eurosystem staff macroeconomic projections for the euro area”, 12 December
2019 and earlier editions.
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