In what was a short week, owing to the bank holiday weekend, Brexit news was light; cross-party talks between Conservatives and Labour continue to progress, reducing angst over a Brexit deadlock. There was a variety of data releases last week from the UK and the Eurozone; the UK continued to show a 44-year low in unemployment in February while wages are at a decade high thanks to an upward revision to January’s data. The picture in Europe, as we have mentioned previously, is mixed; the ZEW economic sentiment survey moved in to optimist territory, hitting a 1-year high while opinion on the blocs’ current economic conditions continued to decline.
The title of this week’s note is aimed at Russia, who have passed a bill to allow the country to create an autonomous internet. Known as “Runet” (Russian Internet), the bill will allow Russia to keep its domestic internet running even when disconnected from non-Russian root servers. The premise is that Russia believes their national security to be at stake and the bill is aimed at countering “aggressive character of the US strategy on national cybersecurity”. Over 300 lawmakers in the lower house voted for the bill, with 68 voting against the bill. To become law, the Federation Council, the upper house of Parliament, must approve the bill, which would come into effect on 1st November 2019. This move has been met by anti-isolation protests in Russian cities.
Chinese GDP data surprised last week as figures showed that the economy continues to grow by 6.4% year-on-year in the first quarter of 2019; although it is important to treat Chinese GDP data with caution. This figure seems particularly impressive when compared to G10 countries; a group of 10 advanced economies, which, over the same period, showed growth of c.1.7%. While annual growth in excess of 6% seems high, by historic standards, this is certainly not the case; looking back to as recently as 2006, Chinese GDP growth was in excess of 15%, one of the highest levels in the country’s history. The ‘surprise’ however is that 6.4% beat the consensus forecast of 6.2% and was due to a jump in industrial production; jumping to 8.5% in March from 5.7% in February. This exceptional increase came from infrastructure projects and 5G production, a trend we expect to continue.