The UK government net borrowing slowed in May relative to last year, falling to its lowest since 2008. This was driven primarily through greater tax receipts. However, the Office of Budget Responsibility is predicting that the rate of borrowing over the full financial year will be higher than in 2016/17. It is likely that the greater pressure to increase public spending and more uncertain economic environment will weaken the government finances. Nevertheless, the total government debt as a percentage of GDP fell last year to 79.8%, down 1.4% on the year before, helped by higher inflation and better than expected economic growth.

Global preliminary PMIs for June, released last week, showed that manufacturing growth remains strong in developed economies. A particular highlight is the euro-zone manufacturing sector, where the PMIs climbed to their highest level in six years. While the US and Japanese figures indicated a slight slowdown the aggregate figure, boosted by Europe, remained broadly steady. The score of 54.2 is still consistent with year on year growth of 3%, strong by recent standards. Furthermore, input prices continued to fall sharply, suggesting that producer price inflation will weaken further in advanced economies, potentially leading to a moderating inflation figure later in the year.

Elsewhere, one of the world’s wealthiest nations and home of the third largest gas reserves, Qatar, continues to face restrictions from its neighbours. Several Arab states led by Saudi Arabia sent a series of demands and a 10 day window to comply. This is the latest round in an escalating dispute between some of the largest energy producing states within one of the most volatile regions. While the dispute continues, there is a risk of supply disruption in the oil and gas markets. However, speculators continue to be mainly concerned with oversupply adding to the risk of a price spike.

UK GDP and current account figures will be released this week along with Japanese unemployment and inflation rates.