Daily Times

Is concern about Brexit starting to hit business confidence? There does seem to have been a slowdown in the UK economy during the first three months of the year, but there was a slowing in the US too, so it is hard to attribute that to fears about the referendum vote. In any case that data was backward-looking, not forward. Large British companies are generally against the idea of leaving the EU, though smaller ones are more divided and may even on balance be in favour of Brexit. Both sides will use whatever data comes through to burnish their case, and the first thing to look at this week will be forward-looking indicators for UK confidence.

The best indicators of this are the purchasing managers’ indices, the clumsy expression for surveys of business expectations: are they likely to increase their sales, take on more workers and so on. They give a good feeling for growth a few months ahead. We get PMIs for UK manufacturing on Tuesday and more importantly for services on Thursday. Services account for two-thirds of the economy so if they are strengthening that would suggest that there is some sort of rebound in the economy. The CBI came out with a positive result in its own confidence survey, so maybe some sort of turning point has been reached. Do not, however, expect either side of the debate to take the evidence at face value, for the rise in confidence could simply be a global phenomenon associated with the recovery in the oil price and commodity markets, or it could simply be that business now thinks the remain camp will prevail.

The second thing to look for will be commodity prices. It has been a funny few months, with widespread fears about another global recession, or at least recession in the US and Europe, and slowdown in China. These have been reflected in the plunge in oil and commodity prices. But now the oil price has recovered despite the collapse of the Opec talks, and commodity prices have been the best investment this year. Of course the markets could be deluded. But commodity markets are ultimately driven by supply and demand, and if there is indeed rising demand for them that may be saying that recessionary fears are easing. More specifically, if oil and commodity prices continue to firm, this will put an end to deflationary fears in Europe – though we will all have to pay more at the pumps.

Third, anyone interested in the US election will be looking at the job market there. If job growth slackens it will support the “America needs fixing” view into which both Donald Trump and Bernie Sanders have in their different ways been able to tap. If it continues at a reasonable pace, then the case for radical change is diminished, which presumably would help Hillary Clinton. One set of numbers, however important, does not determine elections, but job creation is the one to watch. We get the next US numbers on Friday.

Number four will be the way the BHS story moves. There are two broad strands to the debate at the moment. One is about director behaviour: not only how did the owners of the business conduct themselves in this instance, but whether present legislation over the responsibilities of directors of public companies is adequate.

The other is about pensions and in particular the growing divergence between public and private provision. There is the obvious focus on the BHS pension deficit, but most defined benefit pension schemes are underwater: the pot is too small to fund the pensions at present actuarial valuations. However the public sector has proportionately even larger underfunded pension deficits: a liability on future taxpayers. The first strand to the debate will be the one that dominates the next few days, but it will be interesting to see how far the BHS tale triggers a broader inquiry into public pensions as well. Finally, in case you hadn’t noticed, there are some elections coming up on Thursday. But somehow for most people they don’t seem very important. Why? Well, maybe it is because we only have limited capacity to absorb political information, or indeed limited interest in politics, and what capacity we do have has been absorbed by the Brexit debate. Quite what that means for the results I am not sure, but one thing to look for will be the turnout. It could be very low indeed.