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GDP resilient, but still set for contraction in Q1 The small 0.1% m/m gain in real GDP in November (consensus -0.2% m/m, CE -0.3% m/m) suggests the economy was not as weak in Q4 as we had previously thought. But even if the economy does a bit better than …
13th January 2023
While the shift towards higher taxes and spending after the pandemic appears to be here to stay, there is little to suggest an expanded state would curtail GDP growth. But without supply-side reforms aimed at solving the UK’s fundamental problems of low …
10th January 2023
Labour’s big lead in the polls raises the question of what difference a Labour government would make to the economic outlook. The answer is probably not much. A tight grip on the public finances is likely by whichever party is in charge. And the …
9th January 2023
The past few weeks have brought the news that the UK economy is lagging even further behind its G7 counterparts. (See here .) One reason for this relative underperformance is real business investment, which accounts for 9.5% of real GDP and in Q3 was …
6th January 2023
The recent plunge in wholesale gas prices means that utility prices for households may fall below the government’s price freeze in July. As a result, CPI inflation will be around 0.3 percentage points (ppts) lower than we previously thought in the second …
The 0.3% q/q contraction in Q3 left real GDP 0.8% below its Q4 2019 pre-virus level and the UK economy lagging even further behind its major counterparts. In contrast, GDP has risen above its pre-pandemic level in all G7 economies, including the US …
5th January 2023
Higher interest rates continue to weigh on the economy November’s money and credit figures showed further signs that higher interest rates are dampening activity, particularly in the housing market. This will be a constant theme over the year ahead, …
4th January 2023
Higher interest rates continue to weigh on the economy November’s money and credit figures showed further signs that higher interest rates are dampening activity, particularly in the housing market. And this will be a constant theme throughout the year …
This week we learned that the economy contracted by more than we previously thought in Q3. The 0.2% q/q fall in real GDP in Q3 was revised down to a 0.3% q/q decline. More striking is that real GDP was a huge 6% below our pre-pandemic forecast in Q3. …
23rd December 2022
Fiscal stimulus pushes borrowing to a record November high November’s public finances figures showed that government borrowing is rising fast. And with pressures from the weakening economy and most of the costs from the government’s energy price support …
21st December 2022
Fiscal stimulus and high inflation pushes borrowing to a record November high November’s public finances figures showed that government borrowing is rising fast. And the trio of the government’s energy price support, cost of living payments and pressures …
We think the three main economic themes of 2023 will be falling inflation, peaking interest rates and recession. We explained these forecasts in detail in our recent UK Economic Outlook , which carried the title a “A tough year”. (See here .) In short, …
16th December 2022
PMIs suggest we’re in recession, but inflationary pressures continue to ease The flash PMIs for December are consistent with our view that the economy is probably in a recession, although a relatively shallow one at the moment. While the price indices …
PMIs suggest we’re in recession, but inflationary pressures continue to ease The flash PMIs for December are consistent with our view that the UK economy is probably in a recession, although a relatively shallow one at the moment. While the price indices …
No early festive cheer for retailers The 0.4% m/m fall in retail sales volumes in November was well below both our and the consensus estimates for 0.5% m/m and 0.3% m/m gains, and resumes the downward trend seen across most of the year. While we think …
No early Christmas cheer for retailers The 0.4% m/m fall (consensus +0.3%) in retail sales volumes in November resumes the downward trend seen across most of the year. Sales volumes in November were 4.5% lower than at the start of the year. And despite …
The Bank of England followed the Fed by slowing the pace of interest rate hikes from 75 basis points (bps) in November to 50bps hike today as widely expected, which took rates from 3.00% to 3.50%. But unlike the hawkish Fed, the Bank sounded a touch …
15th December 2022
Easing off the brakes, but hikes may not halt until rates hit 4.50% The Bank of England followed the Fed by slowing the pace of interest rate hikes from 75bps in November to a 50bps hike today as widely expected, which took rates from 3.00% to 3.50%. But …
The strikes in December won’t help the economy when it is probably already in recession. But we think real GDP may only be around 0.0-0.5% lower in December than otherwise. More important may be larger pay rises on the back of the strikes possibly …
The Bank of England can breathe a sigh of relief knowing that CPI inflation has peaked. But with activity holding up and wage growth still strengthening, the 2.0% inflation target is still a long way from being hit. As such, the Bank will still probably …
14th December 2022
Inflation passed its peak, slower rate hikes more likely The fall in CPI inflation, from 11.1% in October to 10.7% in November (consensus 10.9%, BoE 10.9%, CE 11.1%,), means that inflation has peaked and the fall in core inflation from 6.5% to 6.3% will …
Accelerating wage growth won’t make the Bank of England’s task easier Coming on the back of yesterday’s larger-than-expected rise in GDP in October, today’s news that the labour market is loosening only gradually and wage growth continues to accelerate …
13th December 2022
October’s rebound won’t prevent contraction in GDP in Q4 The 0.5% m/m rise in GDP in October was mostly due to the rebound after September’s extra bank holiday. Even so, the surprisingly strong rise could tilt the Bank of England towards another bumper …
12th December 2022
Rebound in October likely to be a blip The larger-than-expected 0.5% m/m rise in GDP in October was mostly due to the rebound after September’s extra bank holiday. But it could tilt the Bank of England towards delivering another bumper 75bps interest rate …
If you haven’t started your Christmas shopping, you may not be alone. Both the CBI Distributive Trades Survey and the CHAPS spending data point to a fall in retail sales volumes in November. The BRC/KPMG Retail Sales Monitor, which has a somewhat …
9th December 2022
Shift down from 75bps hike in November to 50bps hike in December MPC starting to think more about the level of rates rather than the pace of rate hikes We think rates will rise to a peak of 4.50%, before being cut sharply in 2024 A shift from the 75 …
8th December 2022
Overview – 2023 will be a tough year for the economy as the effects of the previous rises in inflation and previous hikes in interest rates (as well as a future rise from 3.00% now to a peak of 4.50% in early 2023) are felt. Our view that inflation and …
7th December 2022
This week’s data releases showed that higher interest rates are starting to influence the economy. This means that at some point the Bank of England will have to start to think more about the appropriate level of interest rates rather than the pace of …
2nd December 2022
There is a good chance that CPI inflation has peaked or will peak before the end of the year. There are even some signs that inflation is becoming less persistent. This may contribute to the Bank of England slowing the pace of rate hikes from 75 basis …
Higher interest rates beginning to influence the economy October’s money and credit figures highlight how higher interest rates are starting to influence the economy. Higher interest rates are weakening the demand for credit, especially for mortgages, …
29th November 2022
Higher interest rates are weighing on credit and attracting savings October’s money and credit figures reveal further signs that households continue to remain cautious and higher interest rates are starting to weigh on the economy. The £0.8bn rise in …
The most eye-catching statistic published this week was the net migration into the UK of 504,000 people in the year to June 2022. That’s a record high. It continued the recent trend of net inflows from the non-EU and net outflows to the EU. And it …
25th November 2022
The Treasury has started to make payments to the Bank of England’s Asset Purchase Facility (APF) to cover the losses it has racked up because of the Bank of England’s gilt purchases. While this won’t force the Chancellor to tighten fiscal policy …
With fiscal policy no longer expected to be ultra-loose and some signs emerging that domestic price pressures will ease further ahead, we no longer expect the Bank of England to raise interest rates to a peak of 5.00%. Our new forecast of an increase …
23rd November 2022
PMIs suggest we’re already in recession While the composite flash PMI improved marginally in November, it stayed firmly below the no-change level of 50.0, which is consistent with our view that the economy is already in recession. However, with domestic …
PMIs suggest we’re already in recession While the composite flash PMI improved marginally in November, it stayed firmly below the no-change level of 50.0, which is consistent with our view that the economy is probably already in recession. The composite …
Energy price support puts borrowing back on upward trend October’s public finances figures showed that government borrowing is no longer coming in below last year’s monthly totals. And the combination of the government’s energy price support and …
22nd November 2022
Energy price support puts borrowing back on upward trend October’s public finances figures showed that government borrowing is no longer coming in below last year’s monthly totals. And the combination of the government’s energy price support and pressures …
As the dust settles on this week’s Autumn Statement, we take a step back and answer three key questions. (Clients can catch up on our detailed analysis and our Drop In webinar following Thursday’s fiscal event here and here .) With the economy entering …
18th November 2022
Only a temporary halt to the downward path The 0.6% m/m rise in retail sales volumes was larger than both we (0.0% m/m) and the consensus (+0.2% m/m) had expected. Sales volumes were probably supported by the reversal of bank holiday effects in October. …
Boost from reversal of bank holiday effects won’t last The 0.6% m/m rise in retail sales volumes (consensus +0.2% m/m, CE 0.0% m/m) was probably supported by the reversal of bank holiday effects in October. But, given that the high inflation that weighed …
In his Autumn Statement, the Chancellor, Jeremy Hunt, appears to have pulled off the tricky task of reassuring the financial markets of the government’s fiscal discipline while also managing not to deepen the recession. Our economic forecasts suggest he …
17th November 2022
Chancellor satisfies the markets and helps the economy when it needs it The £55bn (2.0% of GDP) tightening in fiscal policy announced today by the Chancellor, Jeremy Hunt, appears to have been enough to satisfy the financial markets. What’s more, he’s …
This checklist helps clients keep track of the key economic and public finances forecasts announced during the Chancellor’s Autumn Statement at 11.30am on Thursday 17 th November. We will send a Rapid Response shortly after the speech, we are hosting a …
16th November 2022
Inflation may have peaked, but battle not yet won It’s possible that the big leap in CPI inflation from 10.1% in September to a new 40-year high of 11.1% in October will mark the peak. But core inflation may yet rise further, which is why we think the …
CPI inflation may have peaked, but inflation battle is not yet won It’s possible that the big leap in CPI inflation from 10.1% in September to a new 40-year high of 11.1% in October (consensus 10.7%, BoE 10.9%) will mark the peak. But core inflation may …
Labour market looks like it may be turning a corner September’s labour market figures reveal further signs that the labour market is becoming less tight. That may alleviate some of the pressure on the Bank of England to repeat November’s 75 basis point …
15th November 2022
The big fiscal tightening set to be unveiled at the Autumn Statement on 17 th November is coming at a time when the economy is probably already in recession. And the fiscal consolidation, rumoured to be worth a total of £54bn (1.9% of GDP), could risk …
11th November 2022
