The Calm Before the Storm? Brexit Barometer Rose in November

(Bloomberg) -- The Bloomberg Brexit Barometer advanced in November as gains in some sentiment indicators offset increased volatility for the pound and U.K. stocks. But the barometer stayed in “windy” territory for a third consecutive month as attention turned to U.K. Prime Minister Theresa May's promised parliamentary vote on her divorce deal.

The barometer, which includes data for growth, labor market, inflation and other key economic indicators, rose to 14.7 from a revised 7.1 in October. The October reading was the lowest since November 2017.

The Calm Before the Storm? Brexit Barometer Rose in November

Business sentiment improved for the industry and construction sectors last month, but worsened to an 18-month low for services. A measure of policy uncertainty dropped to the lowest level since February.

What Our Economists Say…

Volatility is currently the name of the game. With the Brexit deadline looming, it looks like U.K. data is also increasingly being influenced by the ebb and flow of news related to leaving the EU. We think a Brexit deal will eventually pass Parliament. That should lift a lot of the uncertainty, providing support to business investment and consumer sentiment.
—Niraj Shah, Bloomberg Economics

The Calm Before the Storm? Brexit Barometer Rose in November

Those factors countered relatively high volatility in the FTSE index (at a 30-month high) and the pound (at a 22-month peak). Speculation has been growing that sterling will plummet if Parliament were to reject May’s divorce agreement.

Political Backdrop

The mixed messages around May’s promised Dec. 11 vote, followed by her decision ultimately to postpone it, sent volatility in the pound and the stock market to a two-year and nine-month high, respectively. As a result, the daily Brexit Barometer tumbled to just 6.7 on Dec. 10, close to “rainy” economic weather. May is touring European capitals to seek more concessions with hopes of a parliamentary vote in late January.

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