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With just eight days to go until Brexit and uncertainty higher than ever, it is reassuring that households increased their spending on the high street at a decent rate in February. Admittedly, the strength appears to have come at the expense of non-retail …
21st March 2019
How Brexit pans out will dictate the direction and timing of the next move in interest rates, so it was unsurprising that the Monetary Policy Committee kept a low profile today by voting unanimously to keep rates on hold at 0.75%. But if there is a Brexit …
With just eight days to go until Brexit and MPs seemingly losing their heads, it is reassuring that in February households kept calm and carried on spending. The health of the public finances in February also suggests that the Chancellor has the cash to …
The current divergence between weak business investment growth and strong employment growth won’t last as it’s largely due to the uncertainty caused by Brexit. If there’s a no deal Brexit, both will weaken in tandem. If there is a Brexit deal (either …
20th March 2019
With inflation on the up and signs of increasing inflationary pressures in the labour market, we doubt the Monetary Policy Committee (MPC) will sit on its hands for long after tomorrow’s meeting. If there is a Brexit deal or a short delay, we think that …
There was no sign in the labour market data of Brexit concerns at the start of the year as the data beat expectations in every regard. And solid wage growth and employment alongside weak productivity is a recipe for interest rate hikes later this year. … …
19th March 2019
What happens to business investment next depends on Brexit. But in this Update , we estimate how much has been lost, how much will come back and when. The main message is that some boost is in the pipeline. … What next for business …
18th March 2019
Although sterling could continue its ascent this week if PM May can get closer to squeezing her deal through Parliament, our best guess is that the next big leg up in the currency will occur after 29th March. … Next big leg up in sterling most likely …
The Brexit merry-go-round continued this week, with the voting in Parliament providing little clarity on where the UK is headed and prolonging the political uncertainty weighing on the economy. Indeed, the only real decision MPs have taken this week is …
15th March 2019
The length of any delay to Brexit beyond 29th March could have a fairly large bearing on the performance of the economy and the path taken by official interest rates. A delay of 12 months or more could even open the door to interest rate hikes within the …
As the Brexit circus rumbles on the Monetary Policy Committee’s interest rate announcement on Thursday 21st March will not receive the usual attention. After all, the Committee will keep a low profile by keeping interest rates at 0.75%. But depending on …
The decision by Parliament to ask the EU to delay Brexit beyond 29 th March doesn’t completely rule out a no deal, but it does diminish the downside risk to the economy and increases the chances of a more favourable near-term economic outcome. … Vote on …
14th March 2019
The indication by Parliament tonight that it wants to avoid a no deal Brexit will be welcomed by the financial markets as it reduces the chances of the weakest scenario for the economy, although not eliminated them. The pound has risen throughout the day …
13th March 2019
The Spring Statement was always going to be a sideshow to the Parliamentary votes on Brexit tonight and tomorrow, but the Chancellor managed to provide a small surprise by saying he had more money to spend in the Autumn Budget than was expected. Alongside …
The defeat in Parliament of May’s Brexit deal tonight for a second time increases the downside risks to the economy by prolonging the uncertainty and leaving a no deal a possibility. At least January’s GDP figures released earlier the same day showed the …
12th March 2019
The larger-than-expected monthly increase in GDP of 0.5% in January (consensus 0.2%) is a reassuring sign that, up until January at least, the UK economy was weathering the political crisis at home and slowdown overseas pretty well. … Monthly GDP & Trade …
A series of votes this week might finally see Parliament make a decision on Brexit. Equally, Parliament could vote against all the options, leaving little time for a resolution to be reached before 29th March. … 3 weeks to Brexit: Decision …
11th March 2019
This checklist helps clients keep track of the key official forecasts announced during the Chancellor’s Spring Statement speech at 12.30pm on Wednesday 13th March and to provide some instant context. … UK Spring Statement 2019 …
Next week is likely to be the biggest week for Brexit since the referendum, with crucial Parliamentary votes likely to give us some steer on where the UK is headed. Of course, it is perfectly possible that nothing is decided and there is another step-up …
8th March 2019
There is increasing survey evidence that businesses are stockpiling significant amounts of goods ahead of Brexit, which will probably provide some support to economic growth in Q1. But given that a large proportion of stocks are imported, the net boost to …
7th March 2019
With 23 days to go until the UK leaves the EU and no resolution in sight, we appear to have reached one of the most intense phases of Brexit uncertainty. However, the latest figures have been a bit reassuring. The business activity index of the …
6th March 2019
The Chancellor will probably use his Spring Statement on Wednesday 13th March to show that at a time of extreme political instability and economic uncertainty the public finances are in good health and an end to austerity is around the corner…as long as …
The headline index of the Markit/CIPS services survey in February suggests that at least some of the concern about Brexit’s impact on the economy has been overdone. However, worries about future demand now appear to be seeping into hiring decisions, which …
5th March 2019
One reason why we think the Monetary Policy Committee will raise interest rates further than most forecasters expect – assuming a Brexit resolution is reached – is decent pay growth. We think it will stay around 3.5% this year whereas the consensus and …
4th March 2019
This week’s political developments mean that the chances of no deal have fallen, which probably justifies the jump in sterling. But the real economy is still suffering from Brexit uncertainty. … Chances of no deal …
1st March 2019
The solid increase in unsecured household borrowing in January suggests that the UK’s scheduled departure from the EU and concerns of a disorderly exit were not causing consumers or lenders to become more cautious. … Household Borrowing Monitor …
The manufacturing sector is starting to succumb to the one-two punch from Brexit and the global economic slowdown. The upshot is that there is little chance that the sector will immediately bounce back from the recent contraction. … Markit/CIPS …
The small rise GfK/NOP’s headline measure of consumer confidence in February leaves it only a touch above January’s five-year low, despite a healthy economic backdrop for consumers. As a result, consumer spending growth will probably remain fairly …
28th February 2019
This Update cuts through the Brexit quagmire by highlighting four things we now know about Brexit, four things we don’t, and four implications for the economy and the financial markets. … The knowns and the unknowns of …
The sharp rise in the pound to $1.32/$ and to a two-year high of €1.16/£ this morning is due to two developments on Brexit that appear to reduce the chances of the UK leaving the EU without a deal on 29th March. … Next suite of Brexit votes …
26th February 2019
The Government has the unenviable choice of deciding whether households or firms should bear the brunt of higher tariffs in a no deal Brexit. It will probably opt to expose some firms to more external competition and consumers to higher prices for certain …
By significantly increasing or decreasing the chances of a no deal Brexit, this week could prove pivotal for the economy and the pound. … Brexit: A pivotal week for the economy and the …
25th February 2019
After a worrying start to the year, the economic news this week has been a little better. This supports our view that while Brexit uncertainty is hampering growth, the economy is fundamentally sound. There has been limited reaction in financial markets to …
22nd February 2019
While the uncertainty caused by Brexit is hampering consumption, households’ finances are fundamentally sound. Indeed, with earnings growth at a decade-high in December and inflation below its 2% target, households are now enjoying the first sustained …
21st February 2019
The last set of public finances figures released before the Spring Statement put the government on track to undershoot the OBR’s borrowing forecast of £25.5bn in the 2018-19 financial year. That gives the Chancellor even more room to support the economy …
While reassuring, the large rise in employment in Q4 probably marks a peak in employment growth given the deterioration in surveys of hiring in January. And pay growth plateaued. Nonetheless, we think the Monetary Policy Committee (MPC) might raise …
19th February 2019
As demand and supply would both drop after a no deal Brexit, it’s not obvious how policy should respond. But our view that the drop in demand would last longer than any fall in supply suggests the focus should be on stimulating demand. And even in the …
18th February 2019
It has been a worrying week for the economy. The Q4 GDP figures bore out the story that the global economic slowdown and Brexit worries are weighing on growth. And it increasingly looks like Brexit will go down to the wire. If there is a silver lining, it …
15th February 2019
Despite growing concerns about Brexit, which seem to be weighing on other sectors of the economy, the rise in retail sales volumes in January implies that consumers are still willing to spend. Of course, unless a Brexit deal is signed soon, sales could …
The real Brexit showdown was always expected to take place on 27th February, but if anything this afternoon’s votes in Parliament will add to the current downward pressure on the pound as they have reduced the chances of a deal a bit and raised the …
14th February 2019
Until recently the labour market had seemed to be immune to the Brexit uncertainty which has hampered other sectors of the economy, but there are signs that Brexit is now starting to affect the labour market as well. Slower employment growth presents …
13th February 2019
The fall in CPI inflation in January to below the Bank of England’s 2% target for the first time in two years provided a further boost to households’ real spending power, but we doubt inflation will fall any further. … Consumer Prices & Producer Prices …
If there’s a silver lining from the mounting signs that the uncertainty caused by Brexit is holding back GDP growth, it’s that the economy could enjoy a decent rebound if a Brexit deal is agreed. … GDP First Estimate (Q4 …
11th February 2019
The Bank of England drove a bulldozer through its near-term projections this week as it ratcheted up the severity of Brexit uncertainty and the corresponding impact on the economy in its forecast. We have some sympathy with the Bank’s change of heart. The …
8th February 2019
The Bank of England today emulated the Fed by leaving interest rates on hold, sounding more dovish and hinting that fewer rate hikes are in the pipeline. But if we are right in thinking that GDP growth will be stronger than the Bank believes, then it may …
7th February 2019
It’s possible that the falls in the activity PMIs in January are overstating the extent of the Brexit-related weakening in actual GDP growth. However, the fact that the UK PMIs haven’t fallen further than the PMIs in other major economies suggests that …
6th February 2019
Brexit is a political crisis, not an economic one. While the extra uncertainty caused by Brexit has clearly hampered investment and consumption, the economy is fundamentally sound. There are still many different ways Brexit could play out and this …
5th February 2019
The headline index of the Markit/CIPS services survey in January suggests that the slowdown which began in Q4 worsened at the start of Q1. And worries about future demand now appear to be seeping into hiring decisions, which may start to weigh on …
Parliament hit the Brexit ball back into May’s court this week, leaving us with no clearer picture of how Brexit might unfold than we had this time last week. But beneath the bouncing Brexit headlines, the economy seems to be holding up well … Parliament …
1st February 2019
The developing global slowdown has caused the UK manufacturing sector to weaken despite evidence that activity is being supported by some stockbuilding ahead of Brexit. The upshot is that there is little chance of an immediate bounce back from the recent …
