By David Page, Research & Investment Strategy
5 April 2017
Brexit begins – how do economic agents respond?
Quantifying the impact of increased uncertainty
Key points



Brexit began in earnest last week. The triggering
of Article 50, started a two-year negotiation
phase as the UK attempts to agree separation
and future trade access with the EU.
Is Brexit uncertainty dampening activity ?
Exhibit 1
Investment intentions remain subdued for now
BoE Agent Surveys: Investment intentions
4
BoE manu invest
Index
BoE servs invest
These negotiations are likely to prove difficult
and the timetable is tight. A transition deal may
also prove difficult, leading to the risk of a "cliffedge" exit.
This uncertainty is likely to impact the UK
economy. However, it is unclear to what extent it
will dampen consumption, investment and export
growth.
2
0
-2
-4
Jan 97
Jan 00
Jan 03
Jan 06
Jan 09
Jan 12
Jan 15
Source: BoE




We provide a range of indicators (Appendix A) to
track the impact of Brexit uncertainty dampening
economic activity.
The Bank of England (BoE) has formally
acknowledged greater uncertainty in its GDP
projections.
This uncertainty will likely affect monetary policy
decision-making. We suggest it will focus
attention on shorter-term economic
developments and increase policy inertia.
We maintain our central forecast for Bank Rate
to remain on hold into 2019. However, we
consider the case and provide tools to monitor a
risk case that could see tighter policy before year
end.
Exhibit 2
Export orders are rising, but meeting little response so far
UK - Export growth and survey
40
Export vol EU (ex-oil) [Lhs]
Export vol Non-EU (ex-oil) [Lhs]
CBI export orders' index [Rhs]
% 3m yoy

10
0
20
-10
-20
-30
0
-40
-50
-20
Jan 04
-60
Jan 07
Jan 10
Jan 13
Jan 16
Source: National Statistics, CBI and AXA IM Research
Exhibit 3
BoE unsettled if growth continues above forecast
UK GDP growth outlook
This will determine the sterling outlook. An
expected softening in UK rate markets and initial
negotiations are likely to put downward pressure
on GBPEUR.
20
% qoq
Historic
0.7
BoE (Feb 17)
0.6
AXA IM
0.5
0.4
0.3
0.2
0.1
0.0
Q1 2015
Q2 2016
Q3 2017
Source: National Statistics, AXA IM Research
Q4 2018
The Brexit process officially begins
Nine months after the UK voted in favour of leaving the
European Union, the British Prime Minister, Theresa
May, triggered Article 50. This initiates a two-year period
of intense negotiations after which the UK will formally
leave the EU. But there is much uncertainty surrounding
the outlook for these negotiations and the shape of the
final Brexit arrangements.
In this note we discuss the likely timeline of the next two
years now that the Brexit process is formally underway.
We also consider some of the possible difficulties that
will arise and look at the implications for the UK
economy. Activity has to date proved resilient, with
official data showing an acceleration in activity in H2
2016. We forecast a deceleration starting in Q1 2017.
However, we recognise there is uncertainty over the way
economic agents will respond to Brexit.
Such uncertainty has impacted the Bank of England
(BoE), which recently reported “differing degrees of
confidence” across the Monetary Policy Committee
(MPC) for its central view. Our central forecast is for
Bank Rate to remain on hold until 2019, but we discuss
the risks around that outlook. We look at the implications
this will have for interest rates and for sterling. In
addition, we include tools for tracking how the economy
evolves, with regards to this uncertainty in particular.
Brexit begins, but where does it end ?
Exhibit
provides a stylised overview of the Brexit
negotiation phase. European Council President Donald
Tusk provided “Brexit guidelines” within 48 hours of
receiving notification of Article 50. He added that an EU
Summit will be arranged for 29 April (in between the two
rounds of the French Presidential Elections) where these
guidelines would be formalised. The guidelines would
then be drawn up into formal negotiating conditions,
which would subsequently need to be agreed at a final
Council meeting. This process is expected to be
completed by late-May/June. After this, Michel Barnier,
the European Chief Negotiator for Brexit, will begin
negotiations with the UK.
There are likely to be several difficult issues to discuss
and even the sequencing of those discussions is likely to
prove controversial. The EU wants to first settle the UK’s
separation process (and costs) before moving on to other
issues. Estimates vary for the UK’s eventual separation
bill, but the EU suggests a figure of around €60bn. Britain
is likely to contest such a figure, with the UK’s Brexit
Minister David Davis saying last week that it was
“nothing like” that figure. Europe’s chief Brexit negotiator,
Michel Barnier, believes that this phase could be
concluded by year-end.
The UK will be keen to focus on the future trading
arrangements between it and the EU. The UK would like
to address this issue in parallel with separation, arguing
that the one may influence the other.
Whether discussion of trading arrangements begins in
June or next January, the timeframe to achieve an
“ambitious” trade agreement is tight. With Britain’s
starting position precluding Single Market access, as it
prioritises migration control and moving outside the direct
jurisdiction of the European Court of Justice (ECJ), the
UK is seeking a free trade deal with the EU and a
compromise Customs Union that maintains free borders
for exports/imports but also allows the UK to strike free
trade agreements with third parties. As a point of
reference, Canada’s free trade deal took seven years to
complete although some have argued that a UK deal
could prove easier given that it starts from a position of
‘perfect alignment’ on trading standards as an existing
EU member.
The timeframe is made all the harder with Barnier tasked
to complete negotiations in Q4 2018 to allow time for
ratification by the European and individual member
parliaments. This allows a maximum 17-months to
complete these negotiations. Despite bland assurances
by UK Foreign Secretary Boris Johnson that there will be
“plenty of time”, concerns over timing was in part behind
Sir Ivan Roger’s decision to stand down as UK
Ambassador to the EU at the start of the year.
If 17-months proves too demanding a timeframe to
accomplish the scale of agreement required, negotiations
may also attempt to put in place a transition deal. This
Exhibit 4
Path to Brexit – the Timeline
Mar 2017
Sep 2017
Mar 2018
Sep 2018
Mar 2019
Leave EU
( Mar 19)
UK “Great Repeal”
Bill becomes
effective
UK Parliamentary
vote
Trigger Art 50
Key period for UK to
( 29 Mar 17)
influence EU mandate
Fr elections rd I & II
Ge elections
(23 Apr/7 May17)
(24 Sept)
NEGOTIATION PHASE (From May/Jun 17 to Q4 2018
Citizens rights
Tusk issues “draft
guidelines”
(48 hrs)
EU separation settlement
(negotiated in parallel) ? Future trading relationship
Transition deal ?( Mar 19 - ?)
EU Summit finalise
guidelines
(29 Apr 17)
Guidelines to Council
Directives to EU
leaders = mandate
(May/Jun 17)
Source : AXA IM Research
2

AXA INVESTMENT MANAGERS - INVESTMENT RESEARCH - 05/04/2017
EU Parliamentary
vote to approve deal
(Q4 2018)
EU
Parliamentary
elections
(Jun 2019)
would be designed to cushion the process of separation
and it would have historic precedent - when the UK
joined the European Economic Community (EEC) in
1973, it did so with a seven-year transition deal.
and corporates, are likely to follow the tone of these
negotiations and could adjust behaviour accordingly.
Judging the scale of any future shifts in behaviour will be
difficult.
Yet a transition arrangement would be far from easy to
negotiate. PM May faces a General Election in May
2020. She has promised to deliver Brexit by this time.
Insofar as the UK will have officially left the EU by then,
this should be achievable. However, if the UK were still
facing uncontrolled migration and under the legal
authority of the ECJ, some may question what she had
actually achieved. From an EU perspective, while it
would likely be keen for a definitive end-date for a
transition deal, it would still be paramount not to offer a
better deal to a country leaving the EU than to existing
members. The EU looks highly unlikely to offer ongoing
trade access, even on a transitory basis, if key EU
principles are breached. To that extent the debate
around any transition deal may prove to be a microcosm
of the broader, difficult exit debate.
Exhibit 5
Projected tax cut boost to corporate profitability
This suggests a very real possibility that the UK may
leave the EU without any deal, unable to finalise future
trading agreements or a transition deal.
Exhibit 5 illustrates the rise in our GDP forecast error
since the referendum. Some of the UK’s H2 2016
outperformance appears to have been driven by
temporary factors that should subsequently unwind,
rather than by factors that suggest persistent resilience.
For example, our 0.2% forecast error in Q3 (consensus
forecast error 0.2%, BoE 0.4%) was entirely accounted
for by an erratic 2.7% quarterly rise in the transport,
storage and communication services sub-sector (versus
an average 0.9% rise over the preceding 10 quarters).
Q4 was flattered by a surge in retail sales, which may
have reflected a persistent boost to retail tourism, but
may also be a temporary effect of consumers drawing
forward future consumption in anticipation of future price
rises, or an unrelated shift in spending patterns towards
Black Friday from January sales. These last two
explanations suggest the possibility of an unwind of this
surge, which appears to have occurred over the
Christmas shopping months.
For trade, leaving without a deal would result in the UK
relying on World Trade Organisation (WTO) mostfavoured-nation status with the EU (and other large
trading partners). Even this would not be straightforward.
In practice, the UK would likely mirror the EU’s WTO
tariff structure initially (tariffs that average around 5%
over a broad range of goods, but have important
variations, including a near 10% tariff on cars). However,
while the UK is a member of the WTO in its own right its
current membership terms are bundled with the EU’s.
The UK can only determine its own schedules (a list of
terms of tariffs, quotas and subsidy limits) with a
corresponding adjustment of the EU’s. This suggests an
additional layer of EU negotiations. Moreover, the UK
schedules would then have to be agreed (‘certified’) with
other WTO members, which could result in subsequent
disputes. In that respect, it is both instructive and
troublesome that the EU has not certified its own
schedules since enlargement in 2004.
But if the UK left the EU without any deal, the situation
would have broader ramifications. Barnier mentioned in a
recent speech that this could affect border controls,
citizens living abroad, air traffic and even nuclear fuel
shipments.
This form of exit from the EU is widely regarded as the
worst likely outcome for the UK. When HM Treasury
made its long-term assessment of the impact of Brexit on
the economy, it estimated the likely economic cost to the
UK in the case of a negotiated bilateral deal to be 4.67.8% of GDP. However, if the UK adopted a WTO
trading relationship with the EU it estimated the cost to
rise to 5.4-9.5% of GDP.
UK - GDP quarter ahead growth forecast vs actual
0.8
% qoq
Pre-Brexit vote
Post-Brexit vote
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
Aug-15
Jan-16
Jun-16
Qtr ahead forecast ONS initial estimate
Nov-16
Apr-17
ONS current estimate
Source: National Statistics and AXA IM Research
Yet some of this error reflects undue pessimism on our
behalf, which we are wary of repeating - a task made
more difficult by the uncertainty of agent’s behavioural
reactions. In each key component of UK growth consumption, investment and exports - we argue that
conditions exist that could see ongoing resilient
expansion, in a large part driven by a more stimulative
level of sterling. However, in each case, Brexit
uncertainty could also dampen such stimulus.
Consumer slowdown
The uncertainty impact on the economy
The impending real income squeeze on consumers is the
primary reason for anticipating broader economic
deceleration. We expect CPI inflation to continue to rise
above 2% to reach around 2.75% by mid-year and peak
at 3% in early 2018. Household nominal income growth
is likely to be at best flat. Accordingly, we forecast a
deceleration in real income, which has historically slowed
spending.
These negotiations are also likely to matter for the UK
economy in the short run. Economic agents, households
Yet households can cushion the impact of falling income
by drawing down on savings. Exhibit 6 shows a model
AXA INVESTMENT MANAGERS - INVESTMENT RESEARCH - 05/04/2017

3
explaining the level of the household saving ratio as a
function of real income growth, unemployment and net
worth. It suggests households should be saving less,
largely as a result of the rise in net worth seen since
sterling’s sharp fall. We additionally highlight that the
BoE forecasts an even steeper decline. Such a
drawdown in saving would mute any slowdown in
consumer spending.
Yet during downturns, precautionary savings have lifted
savings ratios above levels suggested by fundamentals
(highlighted below). Such a gap appears to have
emerged in recent quarters (although these figures can
be heavily revised). It is possible that an uncertain (and
publicly acrimonious) negotiation could see households
choose to bolster precautionary savings, reducing the
cushioning effect from falling incomes.
Exhibit 6
How far will reduced saving cushion spending?
UK saving rate (unadj) and model
% yoy
18
Forecast
16
14
12
10
8
Saving rate
2
0
Q2 1988
Exports
UK export growth could also pick-up. UK trade-weighted
foreign GDP growth is forecast to remain steady over the
coming years, thanks in the main to our forecast for
modestly softer GDP growth in the euro area. Moreover,
global trade appears to be recovering somewhat from
relatively depressed growth rates in recent years. Both
factors should result in a modest lift to UK export growth
over the coming two years.
The steep fall in sterling should bolster UK
competitiveness and could deliver marked gains for UK
exports. Exhibit 8 tracks the over/underperformance of
UK export growth relative to trade-weighted overseas
GDP growth and changes in sterling. It shows a marked
and persistent rise in exports after the UK currency left
the Exchange Rate Mechanism (ERM) in September
1992. A sharp fall in sterling failed to precipitate a similar
rise in exports in 2008, reflecting the material drop in
global demand at that time.
Exhibit 8
Will sterling super-charge export growth?
6
4
illustrates, rising gross operating surpluses are usually
associated with rising investment. Although we argue
that Brexit uncertainty will subdue investment, this would
be against a background where business profits would
otherwise suggest a material pick-up.
Modelled F(unemp,net worth,RDI)
UK - Sterling impact on export growth
BoE forecasts
% pts
Q1 1997
Q4 2005
Q3 2014
Source: National Statistics and AXA IM Research
8
Business investment
Exhibit 7
Accelerating corporate profits versus uncertainty
UK Business investment and corporate profits
20
% yoy
Business investment [Lhs]
25
Forecast
Gross operating surplus [Rhs]
20
Model (GDP, ULC, £, CPI-PPI, Oil) [Rhs]
15
10
10
5
0
0
-10
-5
-10
-20
-15
-30
Q1 1988
-20
Q4 1996
Q3 2005
Q2 2014
Source: National Statistics and AXA IM Research
However, on our forecasts, UK gross operating surpluses
are set to receive a significant boost over the coming
quarters, driven in part by the fall in sterling. As Exhibit 7
4

-20
-10
4
A similar uncertainty hangs over business investment. At
present, survey evidence is mixed but BoE Agents’
surveys suggest that investment spending is just above
its weakest level since the financial crisis. We assume
investment remains subdued and consider some
downside risks associated with a risk of firms enacting
Brexit contingency plans and relocating business
overseas.
% yoy
30
%yoy
Residual of demand model [Lhs]
Change in £TW [Rhs], inv scale, 1Y lead
Forecast
Exports exceed model
0
0
-4
10
-8
Exports falls short of model
20
-12
1981
1987
1993
1999
2005
2011
2017
Source: National Statistics and AXA IM Research
We doubt that sterling will deliver a 1992-style rebound.
Firstly, the UK export industry is structurally very different
to what it was in 1992, with many price-sensitive
exporters squeezed out over the past 25 years.
Secondly, many UK exporters are part of a global supply
chain. The fall in sterling will have lowered the sterling
export price but raised component import costs, which
could well be passed on, eroding any competitiveness
boost. Finally, echoing our views on business
investment, although some exporters will enjoy a
competitive boost, the specific uncertainty that Brexit
poses over future trading arrangements may deter firms
exploiting these opportunities. Exporters may be more
likely to allow rising profit margins rather than pursue
market share gains by increasing capacity to boost
volume growth.
As such, we forecast UK export growth to modestly
accelerate to average 1.25% over the coming three
AXA INVESTMENT MANAGERS - INVESTMENT RESEARCH - 05/04/2017
years, faster than the 0.9% averaged over the past
seven years but far short of a post-ERM rebound.
 Household spending slows, without a sufficient offset
by other components of demand.
BoE forecasts see greater uncertainty
Monitoring these judgments will help the MPC determine
whether the economy is adhering to its key forecasts. In
Appendix A, we include a set of charts that monitor
developments in the context of these key variables. They
show inflation is rising but so far, not obviously in excess
of BoE forecasts (we forecast inflation rising to peak at
around 3%, but consider this “broadly in line” with BoE
views); inflation expectations have been stable; pay
growth remains modest; and the outlook for consumer
spending has slowed.
The BoE forecasts GDP growth of 2.0% in 2017, 1.6% in
2017 and 1.7% in 2019, firmer than our own 1.7%, 1.2%
and 1.6%. Yet in recent quarters the BoE has also been
caught off guard by the pace of UK activity, forecasting
GDP growth of just 0.1% in Q3 2016. The BoE
acknowledges the increased uncertainty surrounding its
UK outlook. Exhibit 9 records the BoE’s assessment of
uncertainty, which determines the range of its growth
forecasts in its quarterly fan chart projections. It currently
assesses uncertainty to be more elevated (persistently)
than during the financial crisis. In February 2017 the BoE
envisaged a 60% chance that growth is within a 3.25%
point range (0-3.25%) in three years’ time compared with
a 2.6% range (0.9-3.5%) in May 2016.
Exhibit 9
Will sterling super-charge export growth?
BoE assessment of uncertainty
2.0
We also monitor generic GDP indicators. Beyond Q1
2016, the BoE forecasts UK GDP growth of 0.4% per
quarter from Q2 2016 for the next twelve quarters. This is
broadly in line with it’s assessment of trend growth. In the
short term, we suggest that a persistent and significant
deviation in growth from this projection, shifting the
MPC’s assessment of the economy’s expected spare
capacity, is likely to lead the MPC to consider changing
monetary policy.
%
1.5
1.0
Q3 2007
In addition, Appendix A includes charts that will help us
determine to what extent Brexit uncertainty is dampening
activity in key sectors of the economy. Specifically, we
look at forward-looking indicators for investment to judge
whether businesses appear to be acting in a restrained
manner and measures of export trends. This echoes the
BoE’s caution that other components of demand offset
the expected consumer slowdown.
Q1 2010
Q3 2012
Q1 2015
Q3 2017
Source: BoE
This increased uncertainty makes setting monetary
policy difficult. March’s MPC minutes recorded that the
expectation of economic slowdown “in line with the
February forecast…was held with differing degrees of
confidence across the Committee”. This directly reflects
the increased uncertainty, although the accompanying
more hawkish tone was likely also a reaction to the
BoE’s upward revised ‘nowcast’ for Q1 2017 GDP growth
to 0.6% (from 0.5%), suggesting ongoing resilience.
The BoE’s assessment of increased uncertainty is likely
to lead the MPC to err on the side of caution in terms of
policy changes. While we acknowledge that certain
developments exist that would prompt immediate
monetary policy action, for example a marked rise in
inflation expectations, in other cases monetary policy is
likely to inhibit greater inertia.
Second, greater uncertainty is also likely to see the MPC
place more emphasis on short-term developments as it
attempts to confirm its longer-term hypotheses. In
February’s Inflation Report, the MPC set out three main
“judgments” that its forecasts and policy prescriptions
were founded upon:
 Sterling’s impact on inflation is broadly as expected
and has no adverse impact on medium-term inflation
expectations.
 Pay growth remains modest.
As such, on our central forecast that economic activity
slows across 2017 to 0.4% in Q1 and sequentially to
0.2% by Q4, we maintain our forecast that the MPC
leaves policy unchanged throughout 2017. We also
forecast growth only slowly rising back towards 0.4% by
the end of 2018. Accordingly, with inflation expectations
by end-2018 likely to be envisaging a return below target
over the next two years, we think the MPC will choose to
keep monetary policy stable in the quarters immediately
before Brexit and that Bank Rate will remain at 0.25%
into 2019.
However, if the UK records growth of 0.6% in Q1 (data
released 28 April), the MPC is likely to adopt a more
hawkish tone in the May Inflation Report and could
tighten policy (reverse August’s Bank Rate cut) in H2
2016, if the economy showed no subsequent signs of
slowing.
Indeed, in an upside scenario, with little adverse impact
of Brexit uncertainty, we suggest UK GDP growth could
rise by more than the BoE’s assessment of trend growth
in 2017, 2018 and 2019 (our mean forecast in this
scenario being 2.0%, 1.8% and 2.2%). In this scenario
we would forecast the MPC tightening monetary policy to
1.00-1.25% over the coming years (likely from H2 2017
to mid-2018) – although we would still expect the Bank to
act with caution in the quarters around the UK’s actual
exit from the EU in Mar 2019.
By contrast, we argue that the bar for further easing is
probably higher. We forecast growth slowing to 0.2% by
end-year. Only if growth looks set to slow persistently
AXA INVESTMENT MANAGERS - INVESTMENT RESEARCH - 05/04/2017

5
below 0.2% do we think the MPC would begin to
consider the need for additional stimulus.
The impact on sterling
The outlook for monetary policy is also impacting
sterling. Exhibit 10 shows the relationship between
euro:sterling and the difference in two-year interest rates
(UK-German) encapsulating the market view of monetary
policy developments over the coming years.
Following the marked depreciation of sterling after the
Brexit vote, sterling’s value to the euro has been buffeted
by changes in the relative rate outlook. However, other
factors remain important. Historically, global conditions
including oil prices and risk appetite have influenced
sterling. Moreover, in recent times sterling has
additionally been driven by political developments,
including when PM May discussed a hard Brexit at the
Conservative Party Conference in October last year.
Exhibit 10
Interest rate differentials not sole driver of sterling
Euro and interest rate differential
UK-GE 2yr
EURGBP
EURGBP [Lhs]
0.92
0.55
2yr i/r diff [Rhs]
0.90
Looking ahead, we think political and monetary policy
forecasts will dominate the outlook for sterling in the
short term. In that respect, we anticipate heightened
anxiety associated with the early stages of Brexit
negotiations to weigh on sterling over the coming
months. Additionally, we note that OIS spreads currently
place a more than 50-50% chance of a Bank rate hike
within 12-months. Our own view is that this probability is
too high. Signs of economic deceleration emerging over
the coming months should be reflected in market rates,
narrowing the UK – EU interest rate differential and
adding to downward pressure on sterling. If political
concerns ease across Europe, particularly in France,
over the coming months, the combination of factors could
send sterling back towards £0.90 to the euro.
However, acknowledging the risk of tighter policy,
sterling could rise materially from current levels. In tradeweighted terms sterling fell in excess of 10% after the
Brexit vote as the BoE eased monetary policy
aggressively in August. In part this reflected an
adjustment in a currency that had been partially
expecting tighter monetary policy over the coming
quarters, to one that witnessed a cut in rates. If the MPC
delivered three to four 0.25% rate hikes over the coming
years, we would expect trade-weighted sterling to rise
from current levels by a similar order of magnitude.
0.65
0.88
0.86
0.75
0.84
0.85
Conservative Party Conference:
Hard Brexit discussed
0.82
0.80
Jul 16
0.95
Sep 16
Nov 16
Jan 17
Mar 17
Source: Datastream and AXA IM Research
6

AXA INVESTMENT MANAGERS - INVESTMENT RESEARCH - 05/04/2017
APPENDIX A – Assessing BoE “judgements”
Exhibit 11
Inflation "broadly in line" with Feb. inflation projections
UK inflation projections
% yoy
6
UK market inflation expectations
5
Historic/BoE Nov 16
AXA-IM
BoE forecast (Feb 2017)
4
Exhibit 12
No adverse consequences for inflation expectations
%
5y/5y BE inflation
5y/5y inflation swap
4
Index-linked swap
3
2
2
0
-2
Q1 2012
Q3 2013
Q1 2015
Q3 2016
Q1 2018
1
Jan-00
Q3 2019
Sep-02
Jun-05
Mar-08
Dec-10
Source: BoE inflation Report, Feb 2017 and AXA IM Research
Source: Bloomberg and AXA IM Research
Exhibit 13
Regular pay growth remains modest
Exhibit 14
Household spending growth slows
UK Average earnings growth
8
1.5
% yoy
% yoy
Earnings (ex bonus)
6
Jun-16
UK consumption and retail sales volumes
Earnings (inc bonus)
% yoy
Sep-13
BoE forecasts (Feb 17)
1.0
4
2
2.5
1.5
0.5
0.5
0
0.0
-2
-6
Jan 01
-0.5
-0.5
-4
Jan 04
Jan 07
Jan 10
Jan 13
Jan 16
-1.0
Jan-11
Jan 19
Consumption
Retail sales (3m/3m)
Jan-13
Source: National Statistics
Exhibit 15
Other demand components - investment
Exhibit 16
Other demand components - exports
BoE Agent Surveys: Investment intentions
UK - Export growth and survey
4
BoE manu invest
Index
40
-1.5
Jan-15
Source: National Statistics
Jan-17
Export vol EU (ex-oil) [Lhs]
Export vol Non-EU (ex-oil) [Lhs]
CBI export orders' index [Rhs]
% 3m yoy
BoE servs invest
2
20
10
0
20
-10
0
-20
-30
0
-2
-40
-50
-4
Jan 97
Jan 00
Jan 03
Jan 06
Jan 09
Jan 12
-20
Jan 04
Jan 15
-60
Jan 07
Jan 10
Jan 13
Jan 16
Source: BoE
Source: National Statistics, CBI and AXA IM Research
Exhibit 17
Short run GDP growth indicators
Exhibit 18
BoE unsettled if growth continues above forecast
UK - GDP and PMI indices
2
GDP % qoq
UK GDP growth outlook
PMI index
% qoq
60
BoE (Feb 17)
1
55
0.6
AXA IM
0.5
0
50
-1
45
GDP [Lhs]
-2
Historic
0.7
0.4
0.3
0.2
Manu PMI [Lhs]
40
Servs PMI [Rhs]
-3
35
Jan-97 Jul-99 Jan-02 Jul-04 Jan-07 Jul-09 Jan-12 Jul-14 Jan-17
0.1
Source: National Statistics, Markit
Source: National Statistics, AXA IM Research
0.0
Q1 2015
Q2 2016
Q3 2017
Q4 2018
AXA INVESTMENT MANAGERS - INVESTMENT RESEARCH - 05/04/2017

7
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This document is for informational purposes only and does not constitute, on AXA Investment Managers part, an offer to buy or sell, solicitation or investment advice. It has
been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion,
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