Filtered by Subscriptions: UK Economics Use setting UK Economics
Households are healthy while the government lends a hand The revised GDP figures suggest the response to Brexit uncertainty since the referendum has been larger than previously thought. While headline GDP growth was little changed in recent years, …
30th September 2019
Despite the headwinds from the global economic slowdown and the political chaos around Brexit, there are still good reasons to think that GDP grew in Q3. However, it is clear that the performance of the UK economy will remain below-par until Brexit is …
27th September 2019
Consumers cautiously more confident September’s small rise in consumer confidence probably reflects the falling chances of a no deal Brexit rather than an improvement in the underlying economy. And it still leaves confidence at a pretty low level. That …
This Update was originally sent to clients as a Rapid Response immediately after the ruling by the Supreme Court on the legality of the Prime Minister’s decision to suspend Parliament until 14 th October. The ruling by the Supreme Court that the Prime …
24th September 2019
Student loans and spending pledges leave the fiscal target dead in the water High government spending in the early months of 2019/20 and the change to how student loans are counted in August’s public finances data, combined with the spending increases …
The UK has significant financial ties to Hong Kong, and the recession and correction in house prices we are forecasting there will put the territory’s financial sector under pressure. However, only a couple of UK banks are vulnerable. And as they appear …
23rd September 2019
In recent years the economy has been moving towards full capacity, but at this week’s meeting the Monetary Policy Committee (MPC) judged that it has changed direction and slack is now opening up. Whether that continues, and whether the Committee …
20th September 2019
The decision to reform the RPI measure of inflation at some point between 2025 and 2030 could reduce RPI inflation by a little under 1ppt a year. That could give the Government a windfall of about £3.2bn per annum at the expense of bondholders and …
Given the drop in GDP in Q2, the fall in core inflation to an almost 3-year low in August and the ongoing Brexit drama, there was never much chance that the MPC would raise interest rates from 0.75% today. And even though the tone of the minutes was …
19th September 2019
Sales solid despite fading online boost Following two consecutive monthly gains, a fall in sales in August was always likely. In the event, sales fell by 0.2% m/m (consensus 0.0%, Capital Economics -0.5%) which dragged annual sales growth to an three …
Inflation defies rising pay It is possible to put a lot of the fall in inflation in August down to clothing and computer game prices, which are volatile. But there’s no denying that overall inflation is strikingly weak given high wage growth. The fall in …
18th September 2019
The implementation of a change to how student loans are classified in the public finances, on top of a jump in government spending so far this year and the 2019 Spending Round, means the Government’s fiscal target is dead in the water. But this shouldn’t …
16th September 2019
With the ECB loosening monetary policy this week, the Fed expected to cut interest rates for the second time in two months next week and the growing political chaos at home, you’d be forgiven for thinking that the Bank of England might be poised to cut …
13th September 2019
MPC may be a bit less concerned about a no deal Brexit… …but will still hold off on raising rates It seems almost certain that the MPC will keep interest rates at 0.75% at its next meeting on Thursday 19 th September. The minutes may be slightly more …
12th September 2019
The impact of the trade war between the US and China on the UK economy has been small, even allowing for the indirect effects on investment and the financial markets. Admittedly, trade tensions will probably intensify further from here. Even so, the …
11th September 2019
When the Brexit process comes to a head in October the economy could shift onto a new trajectory. This Update sets out the key events that could affect which of our forecasts the economy follows. The first thing to point out is that there won’t be an …
10th September 2019
Losing some shine July’s figures showed that the labour market has remained remarkably resilient despite the underlying weakness of economic growth, but some small cracks are starting to appear. The most striking aspect of the latest figures was the rise …
Political chaos, yes. Economic chaos, no. While Parliament seems to be falling apart, the economy is holding up reasonably well. July’s surprisingly strong rise in GDP suggests that it has not fallen into a recession. Even if the +0.3% m/m and 0.0% 3m/3m …
9th September 2019
The current economic backdrop means it wouldn’t usually be a good time for the Prime Minister, Boris Johnson, to push for a general election. The 0.2% q/q fall in GDP in Q2 has been followed by a suite of weak activity PMIs in August that has increased …
6th September 2019
While the 0.2% q/q decline in GDP in Q2 and the further falls in the IHS Markit/CIPS activity PMIs in August mean that there is a real risk of a recession, there are reasons to believe that GDP will rise in Q3 and a recession before Brexit will be …
5th September 2019
This Update was originally sent to clients as a Rapid Response immediately after the vote in Parliament late on Wednesday 4 th September on the Prime Minister’s call for a general election on 15 th October. Tonight was a good night in Parliament for the …
4th September 2019
While the bulk of the extra spending unveiled today in the 2019 Spending Round had already been announced, its overall stance was a bit looser than had been anticipated. This could raise GDP growth by about 0.2ppts in 2020 and by 0.1ppt in 2021, …
Services PMI showing cracks but unlikely to break The small drop back in the services PMI in August could indicate that the weakness in some parts of the economy is starting to feed through into the services sector. However, the services PMI is still at a …
Following the vote in Parliament to push on with legislation to rule out a no deal Brexit, a general election is on the cards either before or after a delay to Brexit. With the Conservatives ahead in the polls, a no deal Brexit may will remain a strong …
This Update was originally sent to clients as a Rapid Response immediately after the vote in Parliament late on Tuesday 3 rd September on the first step of plans to delay Brexit from 31 st October to 31 st January 2020. Tonight’s decision by Parliament to …
3rd September 2019
There is a wide range of plausible outcomes for the economy if the Labour Party were to win a general election. But our inkling is that the most likely result would be a moderately weaker economy than otherwise, modestly higher interest rates and bond …
The events in Parliament over the next week and a half will be crucial in determining whether Brexit will be delayed beyond 31 st October, whether there’s an election or whether there is a big step up in the chances of a no deal that could hit the …
2nd September 2019
Manufacturing is slipping into recession The fall in the manufacturing PMI in August to its lowest level since July 2012 suggests the industrial sector has continued to contract. But we doubt that manufacturing will pull the overall economy into …
The PM’s decision to suspend Parliament from the week commencing 9 th September to 14 th October has increased the downside risks to the economy by increasing the chances of a no deal Brexit on 31 st October. (See here .) Indeed, in the week that many …
30th August 2019
The surge and contraction in GDP over the first half of the year can be blamed on the original 29 th March Brexit deadline. While we expect a similar pattern in Q3/Q4 due to the current 31 st October deadline if there isn’t a no deal, we doubt it will be …
29th August 2019
Sentiment amongst businesses and consumers weakens August’s EC survey of UK business and consumer confidence raises concern that the consumer sector may soon succumb to the malaise that has taken hold in the manufacturing sector. But with real wage growth …
The Prime Minister’s decision to suspend Parliament from sometime in the second week of September until 14 th October increases the downside risks to the economy and the pound by decreasing the chances of a further delay to Brexit and increasing the …
28th August 2019
We have our doubts that a US-UK trade deal, even a “modular” one, will be easily achievable if there is a no deal Brexit. In any case, the bigger issue will still be the trading relationship between the UK and the EU. Boris Johnson’s meetings with …
23rd August 2019
The weakness in the retail surveys has led some to question whether the consumer sector will succumb to the malaise that has taken hold in the manufacturing sector. But we are sceptical the consumer sector will falter. In all our Brexit scenarios, we …
21st August 2019
Surplus not enough to put government finances back on track The small surplus in July’s public finances wasn’t enough to make up for the jump in borrowing since the start of the financial year and suggests that borrowing will overshoot the OBR’s forecast …
While much of the sharp contraction in manufacturing in the second quarter can be put down to Brexit distortions, a meaningful recovery is unlikely given the ongoing struggles of global manufacturing. But the resilience of the services sector suggests …
19th August 2019
Whereas an inverted yield curve has been a good indicator of US recessions, the UK yield curve is less reliable. The US treasury yield curve has inverted before all five US recessions in the past five decades, with only one false positive. Over the same …
16th August 2019
The inversion of the yield curve has stoked concerns about the possibility of an imminent recession, if the UK is not already in one. However, even though the downside risks to the economy have increased recently, unless there is a no deal Brexit we still …
15th August 2019
Reasonable start to Q3 The rise in retail sales in July was fairly encouraging and supports our view that the economy has picked up in Q3 after contracting by 0.2% q/q in Q2. Indeed, July’s 0.2% m/m rise in retail sales volumes beat the consensus forecast …
Back above the 2% target July’s inflation figures may dampen speculation that the Bank of England will follow in the Fed’s footsteps and cut interest rates. With stronger pay growth and the fall in the pound likely to ensure that inflation is above target …
14th August 2019
Labour market shrugs off economic contraction The labour market has shrugged off the 0.2% q/q fall in GDP in Q2, providing support to our view that the economy will recover in Q3. Indeed, employment rose by 115,000 on the quarter (consensus +60,000), the …
13th August 2019
The contraction in GDP in Q2 together with the partial inversion of the gilt yield curve has raised concerns that a recession in the UK is on the way if it’s not already here. Indeed, the 0.2% q/q fall in GDP in Q2 suggests the UK is half way towards a …
9th August 2019
Contraction in Q2, but recession unlikely The small contraction in GDP in Q2 throws up the spectre of a recession even before Brexit. However, almost all the weakness was because the original Brexit deadline meant that activity that would have happened in …
We probably won’t know for sure if the UK is heading for a no deal Brexit until the moment it actually happens, which would be at 11.00pm on 31 st October 2019. But there are a number of keys dates in the 84 days between now and then that could either …
8th August 2019
While it will probably be confirmed later this week that the economy didn’t grow at all in Q2, July’s PMIs provide some support to our view that GDP will rise in Q3. Admittedly, both the manufacturing and construction PMIs remained close to their …
6th August 2019
Services sector proves resilient The low level of the PMI surveys, particularly for construction and manufacturing, is consistent with the economy struggling in the aftermath of the original Brexit date. But there was some encouraging signs of …
5th August 2019
MPC living in an alternative reality In our latest UK Economic Outlook , “ An economic multiverse ” (16 th July) , we set out the different paths politics could send the economy down. The MPC took a different approach this week, forecasting an alternative …
2nd August 2019
Much like the Fed, the Monetary Policy Committee today blamed a lot of its more downbeat assessment of the outlook on the global economy. But unlike the Fed, the MPC still thinks it will probably need to raise interest rates (if there’s a Brexit deal). …
1st August 2019
Signs of stabilisation, but no rebound in the works The manufacturing PMI remained at 48.0 in July, which was slightly stronger than expected (consensus 47.7), but it still indicates that manufacturing output fell at the start of Q3. However, the ongoing …
There has been mounting speculation that the Monetary Policy Committee (MPC) will join the global loosening cycle by cutting interest rates. We think it will if there is a no deal Brexit. But if there’s a Brexit deal or many more delays, the UK could buck …
31st July 2019
