Global growth

Don't Know

A survey asked 2000 people where the Battle of the Somme took place. Nearly half of them did not know it was near the Somme. Perhaps they think the Battle of the Bulge had something to do with dieting. As for the Battle of Brexit, nobody has a clue where it is.

Opinion pollsters put the Leave movement ahead while the bookmakers indicate a continuing lead for Remain. Many - perhaps even most - investors fall into the Don't Know category, hence the volatility of sterling in recent weeks. On Monday it was higher: yesterday it was down again. There were no UK economic data to justify either move.

Having strengthened by an average of 0.4% on Monday the pound reversed direction on Tuesday, falling by -0.3%. It was unchanged against euro and lower against almost everything else. Sterling was a quarter of cent higher against the US dollar but that is the only currency against which the pound has gained ground over the last week.


Euroland and Japan released revised figures for first quarter gross domestic product. The Japanese numbers met investors' expectations, with quarterly growth of 0.5%, while the €Z's 0.6% expansion was fractionally bigger than expected. Both sets of data were overshadowed by the World Bank's latest Global Economic Prospects forecasts.

The World Bank opens by saying "Growth prospects have weakened throughout the world economy." In recognition of that it has marked down its global growth forecasts: for 2016, 2.4% instead of 2.9%; for 2017 and 2018, 2.8% and 3% instead of 3.1% and 3.1%. The bank believes commodity-exporting countries face stronger headwinds than importers, an observation that comes as no great surprise.

Canada's Ivey purchasing managers' index fell well short of forecast at 49.4, down by nearly four points on the month, but the Loonie was unaffected. A -1.2% quarterly fall in NZ manufacturing sales had similarly little effect on the Kiwi. The Aussie received some help from a much-smaller-than-expected -0.4% annual decline in Chinese imports.

UK output, NZ rates

The slightly nervous consensus among analysts is that UK manufacturing and industrial production neither rose nor fell in April. They are also guardedly predicting that the Reserve Bank of New Zealand will keep its Official Cash Rate unchanged at 2.25% tonight.

The figures for UK production are not the easiest to forecast, so there could be some sterling action at half past nine. As for the RBNZ, the assumption is that if it does not deliver a quarter-percentage-point rate cut on this occasion it will make the move after the next policy meeting in August. Were there to be no cut tonight, and no comment in the statement about one in August, the Kiwi could well move higher.

South Africa will announce first quarter GDP this morning. The consensus is for a contraction of -0.1% after downwardly-revised growth of 0.4% in Q4 2015. After lunch the NIESR will publish its estimate of UK growth in the May quarter.