Filtered by Subscriptions: UK Economics Use setting UK Economics
Recovery already over, but hope on the horizon We now know that the record breaking fall in GDP of 19.8% q/q in Q2 was followed by a record breaking rise of 15.5% q/q in Q3. But meagre growth in September shows that the recovery was rapidly running out of …
12th November 2020
The Bank of England won’t be worried by the recent jump in gilt yields given that it has been triggered by the growing possibility of a COVID-19 vaccine improving the economic outlook. As such, we have revised up our gilt yield forecasts. However, as the …
11th November 2020
There have been some concerns that as well as there being little scope to generate stimulus through interest rate cuts, the Bank of England is now reaching its limits on Quantitative Easing (QE). But the Bank seems open to loosening its own QE rules. And …
An effective COVID-19 vaccine would dramatically improve the economic outlook. It may allow GDP to rise to its pre-virus level a year earlier than otherwise and mean that the unemployment rate peaks at 7% next year instead of 9%. But while this would …
10th November 2020
Previous unwinding of furlough scheme hurts employment and worse to come September’s rise in the unemployment rate from 4.5% in August to 4.8% suggests that the previous scaling back of the furlough scheme took its toll. And the unemployment rate may yet …
The UK is facing up to the possibility of a festive period dominated by COVID-19 restrictions and Brexit. We think that the England-wide lockdown will shrink the economy by 8% m/m in November and that the rebound in December will be muted. (See Chart 1.) …
9th November 2020
With a newly imposed lockdown, policymakers putting in place more support and economists rushing around changing their forecasts, you could be forgiven for thinking we had somehow been transported back to March! We are hoping that our new forecasts prove …
6th November 2020
This UK Economics Update contains full details of our new economic and financial market forecasts if there is a Brexit deal and for two different kinds of no deal Brexit. It also highlights that business investment is going to remain in the doldrums for …
5th November 2020
Back in June, we predicted that the Bank of England would expand quantitative easing (QE) by a further £350bn over the following 18 months (consensus £100bn). (See here .) By announcing an extra £150bn of QE today, the Bank has already done £250bn of …
We estimate that the second England-wide lockdown will cause GDP to fall by around 8% m/m in November, prompt the unemployment rate to climb to a peak of 9% next year, contribute to the government borrowing around £420bn (21.7% of GDP) this year and lead …
3rd November 2020
We have been warning since early June that a weak economic recovery and the resulting soft outlook for inflation would prompt the Bank of England to loosen policy by more than was widely anticipated. (See here .) And that for the next 6-12 months, the …
30th October 2020
Mini-housing boom continues but consumers shun other borrowing September’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 the …
29th October 2020
Consensus comes round to our view that MPC will expand QE by £100bn in November This won’t be the last QE expansion Negative rates are possible, but probably not for another 6-12 months Back in June, we were pretty much alone in forecasting that the MPC …
28th October 2020
Usually employment is determined by the number of workers needed to satisfy demand, so it has a good relationship with GDP. (See Chart 1.) But due to the national furlough scheme, despite GDP (the black line) plunging, employment (the blue line) held up …
23rd October 2020
Heading for a double-dip The fall in October’s Flash activity PMI comes before the full force of the latest COVID-19 restrictions are felt and supports our view that GDP will stagnate, if not contract, in the last three months of the year. If the economy …
Slowing recovery to weigh on spending The further rise in retail sales in September means that retail sales are now 5.5% above their pre-virus level. But total consumer spending will probably start to stutter over the next few months as the furlough …
Government borrowing shows little sign of easing off Monthly borrowing in September was the third highest on record, only exceeded by that in April and May when the pandemic and the fiscal response were at their height. With the recovery stuttering and …
21st October 2020
Low inflation gives the green light to more QE With CPI inflation just 0.5% in September and new COVID-19 restrictions darkening the economic outlook again, it’s hard to think of reasons why the Bank of England won’t launch another £100bn or so of …
The government is removing some of its support to employment. The national furlough ends on the 31 st October and the new Job Support Scheme is less generous and narrower. As a result, the pace of the fall in employment will soon speed up. At its peak in …
20th October 2020
While we wouldn’t rule out negative interest rates being used a bit further down the line, over the next 6-12 months we think 10-year gilt yields will be kept close to 0.15% by the Bank of England expanding quantitative easing (QE) by a further £250bn by …
We published our new set of economic forecasts on Monday, in which we warned that the tightening in COVID-19 restrictions would mean that GDP might not rise at all in October, November and December. We also said that the unemployment rate would rise from …
16th October 2020
A “circuit-breaker” lockdown where most pubs and restaurants are closed across the country would throw the economic recovery into reverse and mean that, depending on the severity and length of the restrictions, it could be well into 2023 before GDP …
15th October 2020
Overview – The new COVID-19 restrictions will put the economic recovery on ice for the next few months and will prevent the economy from climbing back to its pre-crisis level until the end of 2022. The possibility of even tighter COVID-19 restrictions and …
13th October 2020
More bad news to come The fallout in the labour market from the COVID-19 recession has been worse than previously thought. And with the latest COVID-19 restrictions threatening to stall the economic recovery, if not send it into reverse, the unemployment …
The economic recovery from the COVID-19 recession was always going to slow at some point. But the 2.1% m/m rise in GDP in August was smaller than the 5.0% m/m gain we had anticipated and suggests that recovery is running out of steam sooner than we …
9th October 2020
Recovery already flattening off in August The disappointing 2.1% m/m rise in GDP (consensus forecast 4.6%) adds to the evidence that the initial rebound in economic activity is running out of steam. And with new restrictions being imposed to curb the …
Consumers appear to be much more miserable than the economic fundamentals would imply. But the prospect of a second wave of unemployment and the risk of future lockdowns are not captured well by the models. As such, consumer confidence is likely to stay …
5th October 2020
While UK-EU relations deteriorated on one front this week, with the EU sending the UK a letter to formally begin legal procedures over the UK’s plans to undermine parts of the Withdrawal Agreement, there appears to have been a more constructive mood in …
2nd October 2020
As the differences between a Brexit deal and a no deal are not as big as they once were, the economic costs of a no deal have diminished. The bigger risk is that relations between the UK and the EU deteriorate to such an extent that both sides start to …
1st October 2020
Government passing the pain to households and businesses The bulk of the pain of Q2’s slump in GDP had been borne by the government rather than households and businesses. But with the recovery already flattening off, fiscal support fading and the full …
30th September 2020
Housing market on fire, but consumers seem lukewarm While the resurgence in the housing market continued in August, consumer credit barely rose. And the darkening clouds on the economic horizon may tempt some households to start to rein in spending in the …
29th September 2020
In response to a marked rise in the number of virus cases over the past few weeks, Boris Johnson announced that people should work from home if they can, that bars and restaurants would have to close at 10pm and that the reopening of other parts of the …
25th September 2020
Fiscal support to fade in the autumn The government borrowed another huge sum of £35.9bn in August as it continued to absorb much of the cost of the COVID-19 crisis. But while the Chancellor announced some modest further support yesterday, the big picture …
The policy measures announced today by the Chancellor will go some way to cushioning the blow to the economic recovery from the new restrictions to contain COVID-19 and limiting the long-term hit to unemployment. But these actions won’t eliminate the hit …
24th September 2020
The new restrictions to contain COVID-19 won’t prevent some sectors from continuing to recover, but they will cause others to go backwards. And based on an assumption that restrictions are more likely to be tightened further than loosened, we think …
23rd September 2020
Recovery flattens out The drop in the composite IHS Markit/CIPS Flash PMI suggests that the recovery has already started to flatten out in September. And reinstating restrictions on business opening hours and encouraging people to work from home again …
A tightening in restrictions designed to quash the resurgence in new COVID-19 cases would set back the economic recovery. We’ll be in a better position to quantify the impact once the government announces its plan tomorrow. But if the government resorted …
21st September 2020
Investment holding back the recovery It seems that consumers have largely forgotten about the pandemic already. Retail sales are now 4.0% above their pre-pandemic level (see here ) and the mini-boom in the housing market will continue to support …
18th September 2020
