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Reasons to be cheerful

IMF World Economic Outlook oct 16

On Tuesday, the International Monetary Fund (IMF) released its World Economic Outlook for October and forecast that the world’s seven major economies would grow by 1.6% this year.

Of these seven, the UK led the pack with a projected growth rate of 1.8%, ahead of Germany, with 1.7% and the USA, with 1.6%

The Bank of England has faced criticism for rushing to cut interest rates in the wake of the EU referendum and now it is the turn of the IMF to admit that its predictions were inaccurate regarding the economic effects of a British vote to leave the European Union:

“In the event, really after the first day or so, the market response to the Brexit vote was much more favorable than I think anyone would have anticipated. The market stabilized fairly quickly.”[1]

Maurice Obstfeld, Economic Counsellor and Director of the Research Department, International Monetary Fund

The figures come hard on the heels of other upbeat messages about business in the UK this week.  On 3rd October, the Purchasing Manager’s Index (PMI) for manufacturers reported its highest level since mid-2014.[2]  The following day, the construction PMI showed a return to growth in September and on 5th October, the PMI for services recorded a rise for the second month running. [3] [4]

The timing could not have been better for Theresa May’s government as it concluded its first Conservative Party Conference.

 

[1] International Monetary Fund.  October 2016 World Economic Outlook.   www.imf.org

[2] IHS Markit/Chartered Institute of Procurement and Supply.  Markit/CIPS UK Manufacturing PMI.  www.markiteconomics.com

[3] IHS Markit/Chartered Institute of Procurement and Supply.  Markit/CIPS UK Construction PMI.  www.markiteconomics.com

[4] IHS Markit/Chartered Institute of Procurement and Supply.  Markit/CIPS UK Services PMI.  www.markiteconomics.com