“I pay as much attention to employment trends, PMI surveys and the stuff that the BoE would refer to as ‘softer data’.”
But some of that softer data is also troubling. Consumer confidence remains in the doldrums, and seasonally adjusted household expenditure has fallen for 11 of the past 12 months.
Manufacturing data also suggests a recovery is far from under way. Analysts had expected the UK manufacturing purchasing managers’ index to fall 0.1 points in April from its 54.8 level in March, but instead it dipped to 53.9 – its slowest rate for 17 months.
In the eyes of many, Brexit shoulders a great deal of responsibility for the UK’s stalling economy. Negotiations for the UK’s departure from the EU have shown no significant progress since March, according to Michael Barnier, the EU’s chief negotiator. In mid-May, he said that actual negotiations were, in effect, yet to start.
This has had an effect on the UK’s longer-term outlook. In its ‘World economic outlook’, published in April, the International Monetary Fund (IMF) predicts that Italy will be the only European country to perform worse than the UK over the next two years. It was in fact one positive piece of UK data – the unemployment rate – that the IMF flagged as a potential warning.
The IMF said further falls, producing increased wage growth, may push up an inflation rate that is already above target due to currency depreciation.
Ms Ward, however, feels progress is being made on the main economic issue of the day. “The Brexit negotiations have reached an important milestone, with both sides agreeing to a period of transition between the UK formally leaving the EU in March 2019 and the new relationship coming into force in January 2021,” she says.
“Both sterling and UK interest rate expectations could get a further boost if the next ambition is met: an agreement on [an outline of] terms of the final deal. There are reasons to be optimistic that a deal will be struck. But it may be some months before this emerges, and there could well be significant political and market volatility along the way.”
As a result, the situation remains uncertain. UK equity managers are having to play greater attention to macroeconomic factors than usual, according to Mr Davies.
For those who argue that the economy will quickly overcome its current travails – and make it through Brexit negotiations relatively unscathed – there is an obvious opportunity: UK domestic stocks continue to trade at a substantial discount to peers.
For the less certain, a watching brief remains the most likely course of action.