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Tariffs – UK still not very exposed The announcement of US reciprocal tariffs on 2 nd April will dominate next week. The UK has mostly flown under the radar of Trump’s tariffs and its economy is naturally less exposed than others – our Trade War Dashboard …
28th March 2025
A pause for thought? The Bank of England was never going to do anything but continue the cut-hold-cut-hold pattern and keep interest rates unchanged at 4.50% this week. But the Monetary Policy Committee’s (MPC) hawkish tone suggests it is preparing to …
21st March 2025
Prime Minister Starmer’s announcements this week to abolish both NHS England and the Payment Systems Regulator are the government’s latest initiatives aimed at boosting productivity and, in turn, improving the UK’s medium-term economic prospects. It’s …
14th March 2025
The UK government’s decision to raise defence spending from 2.3% of GDP to 2.5% of GDP by 2027 was upstaged this week. It may have been enough to impress President Trump, but incoming German Chancellor Merz has raised the bar. The German response differs …
7th March 2025
Things change quickly with Trump as President. Only two weeks ago, the title of our UK Economics Weekly was “Trump’s tariffs tirade becomes more troubling for the UK” as it looked as though the UK’s goods exports to the US would be hit with a 25% …
28th February 2025
The news on inflation this week was worrying, raising the risk that CPI inflation will remain higher for longer and interest rates will be cut more slowly than we expect and/or not as far. (See here .) Data released this week revealed that wage growth was …
21st February 2025
The potential tariffs that UK exporters could soon face for sending goods to the US became bigger this week. On Monday, Trump said that US imports of steel and aluminium from all countries would face tariffs of 25% from 12 th March. Then on Thursday he …
14th February 2025
The overall message from the Bank of England this week was decidedly dovish, raising the risk that interest rates will be cut further and faster than our forecast of a fall from 4.50% to 3.50% by early 2026. But as we unpacked in our reaction to the …
7th February 2025
The Chancellor’s plans to “kickstart economic growth”, which she set out in a speech this week, probably won’t lift the economy out of its recent malaise in the coming quarters. But at the margin, the announcement of some policies and initiatives aimed at …
31st January 2025
In the first glimpse into how the economy has started the new year, this week’s data took another turn for the worse. First, according to the CBI Industrial Trends Survey (ITS) of the manufacturing sector, in Q1, the optimism, expected activity and …
24th January 2025
The Chancellor was able to breathe a sigh of relief this week after favourable CPI inflation prints for December in both the UK (see here ) and the US (see here ) led to a reversal in last week’s leap in gilt yields. In fact, the 28 basis points (bps) …
17th January 2025
This week’s leap in gilt yields creates more problems for the Chancellor and is an extra headwind for the economy. But it is not a crisis. Admittedly, it is always worrying when UK bond yields rise by more than yields elsewhere and the pound weakens. …
10th January 2025
A look back at 2024 reveals that some of our forecasts were good and some were off. We were right to forecast this time last year that Bank Rate would be cut only gradually, from the peak of 5.25% to 4.75%. (See here .) That turned out to be closer than …
20th December 2024
We’ll be discussing the outlook for Bank of England, ECB and Fed policy in a 20-minute online briefing at 3pm GMT on Thursday 19th December. (Register here .) At the start of this year we thought that GDP growth would gather momentum throughout the year. …
13th December 2024
The government’s new “mission” to deliver “higher living standards…through higher real household disposable income (RHDI) per person and GDP per capita by the end of the parliament” is not ambitious. Real GDP per capita has grown by 1.9% a year on average …
6th December 2024
In an economy where the government is boosting its spending and investment, we need to be extra cautious when interpreting the activity data. This is because there are lots of frequent indicators on private sector activity, but fewer indicators on public …
29th November 2024
While it was widely expected that CPI inflation would rise above the 2.0% target in October, the rebound from 1.7% to 2.3% was stronger than most forecasters had anticipated. And our view is that CPI inflation will rise further, to nearly 3.0% in January …
22nd November 2024
Today’s GDP release, which confirmed that the economy has barely grown at all since March, is clearly a blow for the government given its pledge to secure the “highest sustained growth in the G7”. This means that while the UK has now surpassed Japan and …
15th November 2024
After a big couple of weeks for the UK, the US, the world and global financial markets, we have revised some of our economics forecasts. Due to the policies in the UK Budget (bigger and sooner rises in government spending than taxes, see here ), we now …
8th November 2024
While the market fallout from Wednesday’s Budget is still a long way from the 2022 mini-budget episode, investors are clearly nervous about the fiscal outlook. Gilt yields have risen sharply since Wednesday’s Budget. The 10-year yield is up about 21 basis …
1st November 2024
Why does the new rule allow more borrowing? The Chancellor, Rachel Reeves, has confirmed that in next week’s Budget she will shift from targeting the Public Sector Net Debt excluding the Bank of England (PSND Ex BoE) measure of government debt to another …
25th October 2024
Until now, all the focus has been on the Chancellor’s £22bn fiscal “black hole”. This week a different, bigger, number hit the headlines: a £40bn “funding gap”. Why the change? A crucial distinction is the time period they relate to. The £22bn “black …
18th October 2024
It makes sense that businesses and households are getting jittery ahead of the Budget on 30 th October. After all, it’s no secret that taxes will rise. This explains the falls in both business and consumer confidence in September. (See Chart 1.) (Our …
11th October 2024
Oil spikes, but won’t knock the BoE off course On its own, the jump in oil prices from $72 per barrel (bp) on Monday to a one-month high of $79pb due to the conflict in the Middle East (see here and here ) isn’t enough to have a bearing on how fast the …
4th October 2024
Government hinting about more investment The government appears to be laying the ground for a rise in public investment in the Budget on 30 th October. This week the Chancellor said “growth is the challenge and investment is the solution.” That was …
27th September 2024
The contrast between the Bank of England keeping interest rates on hold at 5.00% this week, along with the accompanying message that it will cut interest rates only gradually, and the US Fed kick-starting its easing cycle with a big 50 basis point (bps) …
20th September 2024
The Office for Budget Responsibility’s (OBR) “Fiscal risks and sustainability report”, published this week, showed that if left unchecked the public debt to GDP ratio would spiral from 98% now to 274% by the mid-2070s. Assuming a recession comes along …
13th September 2024
The lingering concerns over whether the US manufacturing sector and overall economy are heading for recession begs the question of whether the UK’s manufacturing sector and overall economy will go the same way. The fear is that the recent period in which …
6th September 2024
The Prime Minister’s statement this week that “there is a budget coming in October, and it’s going to be painful…those with the broader shoulders should bear the heavier burden” has prompted yet more speculation about how much tax revenues will rise and …
30th August 2024
At first glance, the 1.1% m/m increase in Adzuna job vacancies in July, the first monthly rise this year, together with the fall in the unemployment rate to 4.2% in June and the 127,000 rebound in employment between April and June, suggests the recent …
23rd August 2024
The good news just kept coming this week. The economy grew by an above-trend rate for the second quarter in a row in Q2 (see here ), the unemployment rate fell to 4.2%, well below most estimates of the natural rate of around 4.50%. (See here .) And at …
16th August 2024
After stagnating in the first half of this year, the Halifax house price index jumped by 0.8% m/m in July in response to the fall in mortgage rates from 4.9% to 4.7% in July. (See here .) What’s more, July’s RICS survey suggests that increasing demand …
9th August 2024
This week was a good example of a “hawkish cut” from the Bank of England. The cut bit; the first 25 basis point (bp) fall in interest rates since March 2020. The hawkish bit; the Bank stated very clearly that it doesn’t expect to cut rates too much or too …
2nd August 2024
This week’s news that higher shipping costs pushed up the manufacturing input prices balance of the PMI survey to an 18-month high in July (see here ) has reignited concerns that shipping costs will drive a rebound in core goods CPI inflation. (See Chart …
26th July 2024
Given the UK recently got much closer to the government’s target of building 300,000 homes a year than is acknowledged, you might think that the Planning and Infrastructure Bill announced in the King’s Speech this week would be enough to get new home …
19th July 2024
We presume there isn’t a statistical relationship between economic performance and success on the football pitch (although we haven’t tested it). But perhaps comparing the economic performance of Spain and England (we use the UK as a proxy) over the next …
12th July 2024
After six weeks of intense discussion about what Labour would do if it won the election (for all our analysis, see here ), we are now there. We set out what Labour’s 174 seat majority means for the economy and the financial markets here and discussed the …
5th July 2024
It is striking how calm UK financial markets have been ahead of next week’s general election. As we set out in our UK Markets Chart Pack , while investor concern over the result of the French elections has led to a near-30 basis points (bps) rise in …
28th June 2024
Economic soft landing not budging the polls It is striking how little recent economic events have influenced the polls ahead of the general election on 4 th July. This week’s news that CPI inflation fell to 2.0% in May meant that, just as we predicted …
21st June 2024
Higher levels of housebuilding is a prize that both Labour and the Conservatives seek, evidenced by the identical target of building 300,000 new homes a year published in their manifestos this week. (You can see all of our election analysis here , and …
14th June 2024
This week both the Conservative and Labour Party have been quick to tell us about ‘financial black holes’ in their opponent’s tax and spending plans. But there are two big things neither party is telling us. First, sticking to their fiscal rules means …
7th June 2024
With both Labour and the Conservatives this week ruling out increases in income tax, national insurance and VAT, it remains difficult to see how cuts to public services can be avoided after the election. (For all our election analyses, see here .) But …
31st May 2024
It’s tempting to think that every bit of economic data released between now and the general election on 4 th July will make a difference to who will be Prime Minister on 5 th July. Inevitably, data releases will be written up as “good” or “bad” for Sunak …
24th May 2024
We’ll be discussing the outlook for UK inflation and interest rates in a 20-minute online briefing at 9.30am BST on Wednesday 22nd May shortly after the release of April's CPI data. (Register here .) Next Wednesday’s release of April’s CPI inflation data …
17th May 2024
With the Bank of England hinting on Thursday that it is close to cutting interest rates and that rates may need to fall further than investors expect, we have become a bit more confident in our view that, due to low inflation, rates will be cut from 5.25% …
10th May 2024
We’ll be discussing the outlook for Bank of England policy in a 20-minute online briefing at 3pm BST on Thursday 9th May. (Register here .) OECD too downbeat We think the OECD’s new forecast that the UK will grow at a slower rate in 2025 (of 1.0%) than …
3rd May 2024
This week the FTSE 100 broke through the 8,000 mark for the first time since its brief three-day flutter in February last year and reached a record high of 8,100. This appears to be justified based on the recent improvement in economic activity. Indeed, …
26th April 2024
In the previous Weekly we said “the risks are tilted towards inflation proving sticker and rate cuts happening a bit later”. This week’s global and domestic events have left our forecast that interest rates will first be cut from 5.25% in June and will …
19th April 2024
Where the US leads, the UK often follows. So the rebound in the US CPI inflation rate from 3.2% in February to 3.5% in March and the unchanged core CPI inflation rate of 3.8% has spurred fears that the downward trend in UK inflation will soon stall. In …
12th April 2024
Whether you’re a monetarist or not, it’s hard to ignore the big rise in the annual growth rate of M4 money coming out of the pandemic being a harbinger of the surge in CPI inflation. Shortly before CPI inflation surged from 0.3% in November 2020 to a …
5th April 2024
