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The new Tier 4 COVID-19 restrictions, which closely resemble November’s lockdown, raise the chances that the economy stagnates, if not contracts, in the first three months of 2021. If the economy is heading for a double-dip, at least the second leg down …
21st December 2020
The sentiment from this passage we published in the first UK Economics Weekly of this year still feels relevant for 2021: “With something like a no deal still possible in December, Brexit uncertainty will prevent 2020 being a good vintage for the …
18th December 2020
Second lockdown has much smaller impact than the first The relatively small drop in retail sales in November indicates that the second COVID-19 lockdown didn’t change households spending behaviour by anywhere near as much as the first. And it suggests …
The positive news on vaccines meant that the Monetary Policy Committee (MPC) didn’t feel the need to loosen policy any further at its December meeting today. And, as long as there is a Brexit deal by 31 st December 2020, we don’t think it will need to …
17th December 2020
PMIs understating both the fall in GDP and the rebound The small rebound in the composite PMI in December suggests that GDP did not make much of a recovery after the hit to activity from the COVID-19 lockdown in November. But it is probably understating …
16th December 2020
Low inflation won’t prompt the MPC to act The sharp fall in inflation from 0.7% in October to 0.3% in November (consensus 0.6%) and in the core rate from 1.5% to 1.1% came as a bit of a surprise. However, some of these moves were driven by one-off …
In contrast to the consensus, we think that the economic recovery in 2021 will be quicker and fuller, the Bank of England will continue to shy away from negative interest rates, the Chancellor won’t tighten fiscal policy and if there’s a no deal Brexit, …
15th December 2020
Steady drip-feed of weaker news The smaller-than-expected fall in employment in October shows that the government’s furlough scheme has minimised the labour market damage from COVID-19 so far and provides encouragement that there will be a steady trickle, …
It’s been over four years since the EU referendum and the world is a clearly a very different place. However, when it comes to Brexit, it feels like Groundhog Day. The EU Summit on 10 th /11 th December, billed as the moment when a Brexit deal could be …
11th December 2020
Vaccines mean the recovery may not need a further monetary boost But monetary policy will remain extremely loose for years yet And a no deal Brexit could yet prompt further easing The next Monetary Policy Committee (MPC) meeting on Thursday 17 th December …
10th December 2020
GDP barely grew at all in October, but hope further ahead The economy continued to grow in October, but at a snail’s pace. And with the COVID-19 restrictions likely to remain in place for some time, the economy is in for a difficult few months yet. But …
At some point, there may need to be a fiscal squeeze to pay for any lasting increase in spending caused by the COVID-19 crisis and increases in age-related spending. But the biggest danger is that fiscal policy is tightened too much too soon to fill a …
8th December 2020
Brexit is going to get a lot of airtime over the next few hours, days and weeks, especially once the outcome of the call between Boris Johnson and Ursula von der Leyen later this afternoon is made public. But most of the coverage about a deal or no deal …
7th December 2020
Depending on which paper you have read this week a Brexit deal is either all-but done, with just some technical details to iron out, or the negotiations are about to collapse due to demands from the EU and intransigence by the UK. We admit that we don’t …
4th December 2020
COVID-19 vaccines have dramatically brightened the economic outlook. GDP probably still fell during the second lockdown in November, perhaps by up to 8% m/m, and the strict COVID-19 regional tier system will limit the rebound in activity in the coming …
3rd December 2020
Households in a good position to start spending once restrictions lifted October’s money and credit data showed that the mini-boom in the housing market continued, but a fall in consumer credit suggests that consumer spending was already faltering before …
30th November 2020
Following the news on 9 th November that the Pfizer and BioNTech COVID-19 vaccine is very effective, we highlighted how this could dramatically improve the economic outlook. (See here .) Since then, the positive news on other vaccines has convinced us to …
27th November 2020
COVID-19 vaccines are a gamechanger for our economic forecasts and mean that we now think that by the middle of the decade the economy won’t be much smaller than if the COVID-19 crisis had never happened. This is a more positive outlook than the views of …
The Chancellor, Rishi Sunak, was right to say today that now is not the time to tighten fiscal policy. But given the OBR’s downbeat forecasts, the biggest danger is that the government is lured into withdrawing its support too much too soon. That could …
25th November 2020
PMIs suggest economy holding up better than expected in second lockdown The relatively small fall in November’s flash composite PMI suggests that the hit to GDP from the second lockdown will be much smaller than the first and that our expectation of an 8% …
23rd November 2020
In the webinar we hosted this week titled “The UK’s Triple Threat – COVID, Brexit and Debt”, we concluded that the outlook for the economy is brightening. That is unless politicians darken it again with an “uncooperative” no deal Brexit or by tightening …
20th November 2020
Better news on government borrowing won’t last October’s public finances figures were far better than expected. But the likely economic contraction in November and extension of the government’s support measures mean that the better news won’t last. The …
Shift towards online supports sales before lockdown The further rise in retail sales in October means that retail sales are now 6.8% above their pre-virus level. But the current lockdown means that retail sales, and total consumer spending, will probably …
Pockets of pandemic-induced inflation, but outlook subdued The rise in CPI inflation from 0.5% in September to 0.7% in October shows that inflation is well past its crisis low point of 0.2%. But while it will rise more significantly from next April, we …
18th November 2020
Our measures of labour market slack suggest that the official unemployment rate is significantly understating how much spare capacity there is at the moment and will probably continue to do so for a long time. This supports our view that even with a …
16th November 2020
This week’s release of the Q3 GDP data showed that despite a record-breaking 15.5% q/q surge in GDP, the economy was still 9.7% smaller than at the end of 2019. In contrast, the French, Italian and German economies were all about 4% smaller and the US …
13th November 2020
