UK reports GDP, Catalonia votes, FedEx results
The FT's Vanessa Kortekaas highlights the key stories to watch for this week, including the release of UK GDP figures, a regional election in Catalonia and results from FedEx.
Produced by Vanessa Kortekaas. Filmed by Petros Gioumpasis. Still images by Getty.
Hello, welcome to the Week Ahead from the Financial Times in London. Here's some of the big stories we'll be watching in the coming days. How has the UK economy fared since the Brexit vote? We'll find out when the latest GDP figures are published. Catalonia is set to head to the polls again, this time in a regional election. And we'll get a health check on FedEx when the company reports its quarterly results.
Let's start in the UK, where on Friday we'll find out whether the economy has remained sluggish in the third quarter. As it stands, indications are showing that the UK economy will grow 1.5% in 2017. And the third-quarter figures will tell us whether there is any hidden dynamism lurking, which could boost that figure. If the headline remains unchanged, the focus will be on details about household income and expenditure. Since the UK voted to leave the EU, household savings rates have fallen from 7.5% of income before the Brexit vote, to 5.9% a year later.
The big question, though, is whether the likely anaemic rate of growth has also come with even lower savings. If so, it doesn't bode well for the future since the savings ratio cannot keep falling forever. Here's our economics editor, Chris Giles, with more on what to watch for in the data.
The figures are going to show how the Brexit vote has affected the UK economy. So the UK economy has definitely slowed this year in 2017, it will grow by, let's say 1.5%, but that's in comparison with the rest of the G7, the other leading economies of the world, which have been accelerating this year. So while the rest of the world's been getting better, Britain has been getting worse. It's not falling into recession as some people had thought, but it's definitely been pretty soggy.
And the other thing we've got to look at in the figures is the reasons why that's the case. Is it because consumers are now no longer spending as much, or is it because they've been squeezed from the weak pound, higher import prices? So household finances are well under pressure.
Now, Catalonia is set to go to the polls this week in a regional election that has become the latest battleground in a bitter conflict between those that want the wealthy region to break away from Spain, and those that want to stay. A victory for the pro-independence parties could mean another unilateral push for separation, of the kind that shook Spain in October, when the regional parliament declared an independent republic. The proclamation, which was deemed illegal under the Spanish constitution, led the national government to temporarily suspend the autonomy of the region, dissolve the government, and call for the new elections, which are set for Thursday. The polls put the three pro-independence parties and the three anti-independent parties roughly neck and neck in terms of votes. Here's Gideon Rachman, our chief foreign affairs columnist, to explain how significant the Catalonia issue is for Europe.
I think many people in the European Union were startled by the scenes of violence on the streets of Barcelona, and a little uncomfortable by the fact that the Spanish government has actually arrested some of the leaders of the Catalan independence movement. But on the other hand, the last thing they want to do is to get involved in a Spanish domestic political fight, so they're inclined, for now, to accept the Spanish government's line on this, which is that this was an illegal separatist movement. These people are being treated within the law. And more broadly, I think the EU is simply hoping that somehow this situation will calm down because the last thing they need is another big internal crisis in one of the EU's largest member states.
And finally, FedEx is set to report its fiscal second-quarter results this week. The US parcel delivery company is considered a bellwether for the economy, and forecasts show it is expected to report a 5% climb in its a year on year revenues to $15.7 billion. Investors will be looking for updates on the peak holiday shopping season as the company benefits from the rise of e-commerce and a boost in deliveries, but shipments to homes tend to be less profitable than those to businesses. Investors will also be watching for any tweaks to the companies that look after FedEx slashed its full-year earnings forecast in September. This was reflecting the impact from the cyberattack on TNT Express in June. Here is Mamta Badkar with more on the challenges FedEx is dealing with, including the fallout from that cyber attack.
A cyber attack on FedEx's TNT Express unit ended up costing the company about $300 million in fiscal first quarter, ended in August. It also prompted the company to lower its outlook at the time. Investors, this time around, will be looking to see, A, how the company is recovering from the attack. B, if the integration continues on track, and then also if the company is in fact going to take on any sort of cyber insurance.
And another thing investors will be looking at, is tax reform and how that may impact the company. The shares of shipping companies have rallied in recent weeks on expectations that there may be a provision in the tax reform that allows shipping companies, in particular, to deduct capital equipment expenses immediately instead of over a period of time. So any management commentary on tax reform is something else that investors will be paying attention to.
And that's what the Week Ahead looks like from the Financial Times in London. See you again next time.