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While it is guaranteed that the Monetary Policy Committee will leave interest rates at 0.75% at the policy meeting on Thursday 7th February, the accompanying Inflation Report may provide some crucial clues to how keen the MPC is to change rates once …
31st January 2019
While GfK/NOP consumer confidence held steady in January, it did so at a five-year low of -14, and the bigger picture is that consumers remain downbeat despite a fairly healthy economic backdrop. That seems to reflect worries over Brexit. So while …
A strong labour market, rising real wages and more supportive fiscal policy should mean that households will be in a pretty good position over the next two years, even if interest rates rise. And once (if) a Brexit deal is agreed, consumers may regain the …
30th January 2019
The uncertainty around Brexit may have weighed on household borrowing in December. But stronger finances should allow households to continue to spend even if borrowing remains subdued. … Household Borrowing Monitor …
Support for Brady’s Brexit amendment in the House of Commons this evening is good result for Theresa May but is arguably not the best news for the near-term outlook for the economy and the pound as it probably increases the chances of a no deal. This …
29th January 2019
In this Focus , we consider how sterling, Gilts and UK equities will be affected by the outcome of negotiations over Brexit and the global economic slowdown that we are anticipating. Our judgement is that the UK’s currency and 10-year government bond …
Two of our big non-consensus calls are that in time fiscal policy will become more supportive for the economy than the Chancellor’s current plans suggest and that interest rates will rise a bit more quickly than the markets and most forecasters have been …
As long as some form of Brexit deal is agreed this year, then the UK is well placed to shrug off the slowdown in the global economy. In fact, in 2020 the UK may surprise most people by being the fastest growing economy in the G7. … How will the UK cope …
28th January 2019
With 60 days to go and no deal agreed, it looks increasingly likely that Brexit will be delayed beyond 29th March. This Update answers seven questions on how Brexit could be delayed by extending the “Article 50” negotiation period and what that would mean …
While the vote in Parliament next Tuesday might not break the Brexit deadlock, it could give us a better steer on where the UK is headed. After all, MPs will vote on a series of amendments which could take a no deal Brexit off the table. Given that this …
25th January 2019
The slump in retail sales volumes in December is not too worrying given that it seems to have largely reflected consumers bringing forward Christmas purchases in order to take advantage of ‘Black Friday’ discounts. After all, sales rose sharply in …
24th January 2019
The labour market figures for November were reassuring as they showed no sign of any hit to firms’ hiring from Brexit. And with pay growth also strong, households remain well placed to increase spending if and when the Brexit handbrake is released. … …
22nd January 2019
The Prime Minister’s “Plan B” is remarkably similar to Plan A, which Parliament rejected less than a week ago, so it doesn’t appear to change the near-term outlook for the economy. In that regard, votes on amendments to Plan B on Tuesday 29th will …
21st January 2019
With Prime Minister Theresa May now holding cross-party talks, the chances have risen of a “soft” Brexit, resulting in the UK retaining closer ties with the EU than her defeated deal would have involved. A new set of negotiations would prolong the Brexit …
18th January 2019
UK politics remains in meltdown. And there are plenty of signs that this is weighing on sentiment. But beneath this, the economy is well placed to benefit if and when the Brexit uncertainty lifts. … Sentiment, not fundamentals, weighing on …
December’s slump means that retail sales volumes fell in Q4 as a whole. Unless a Brexit deal is signed soon, there is unlikely to be much of a rebound in Q1 2019 either. That said, if a no deal Brexit is avoided, consumers should be in a good position to …
The overwhelming defeat of the Brexit deal in Parliament last night increases the chances of the economy performing along the lines of our “fudge and delay” scenario, in which GDP growth rebounds in the second half of 2019 and into 2020. That said, in …
16th January 2019
Whatever the Bank of England thinks about yesterday’s failed Brexit vote, it will surely be pretty content with the news this morning that inflation has fallen to within a whisker of its 2% target for the first time since January 2017. Unlike Parliament, …
The resounding defeat of May’s Brexit deal in Parliament by a huge 230 votes this evening is a very bad result for the Prime Minister but could prove to be a good result for the near-term outlook for the economy and the pound. … Meaningful Vote on May’s …
15th January 2019
Either a narrow or a heavy defeat in Parliament’s meaningful vote on Theresa May’s Brexit deal tonight would probably prompt the pound to rise. An inconclusive moderate defeat would arguably be the worst result for the pound, as it would prolong …
In this Update we set out what might happen with Brexit over the coming days and months. We have already illustrated how the various Brexit outcomes would influence the economy and financial markets. Here we address the political and procedural questions …
14th January 2019
The most likely Brexit outcome, for now at least, appears to be a delay of a few months beyond March. While this means that we will have to wait a little longer for the Brexit handbrake on the economy to be released, we are still more optimistic than most …
11th January 2019
The easing in GDP growth in the three months to November leaves growth only a little below the rates seen before the temporary factors of the World Cup and the unusually hot weather boosted it in the summer. Presumably growth will slow further in Q1 as …
Given the huge and growing uncertainty surrounding Brexit, we are now placing much more emphasis on three forecasts for the economy that are based on different Brexit outcomes. The key point, though, is that in each scenario we are a bit more optimistic …
10th January 2019
It looks as though the festive period was fairly underwhelming for the retail sector. But Christmas sales don’t tend to set the tone for the next year, and we think the weakness is mainly due to Brexit uncertainty. As such, once (if) a deal is agreed, …
8th January 2019
It’s well known that the uncertainty caused by the Brexit bedlam probably contributed to GDP growth easing from 0.6% q/q in Q3 of last year to 0.3% or less in Q4. But it’s less appreciated that should a way out of the Brexit quagmire be found in the next …
7th January 2019
Much like a drone over an airport runway, Brexit is preventing the UK economy from taking off in 2019. But the foundations are in place for growth to fly once (if) Brexit lands. … Slow growth, Christmas spending & …
4th January 2019
The uncertainty hanging over the economy prevented households from committing to much unsecured or mortgage borrowing in November. But at least there is still little sign that they have decided to boost savings sharply, which would have a big adverse …
Despite the small rise in the headline index of the Markit/CIPS services survey in December, it is quite clear that economic growth slowed in Q4. But we think this survey is once again overstating the extent of the easing. What’s more, if (and it is a big …
Despite the headline manufacturing PMI hitting a six-month high in December, the sector probably stagnated at the end of 2018. There were some signs, though, that worries of an impending no deal Brexit will provide a short-term boost to manufacturing …
2nd January 2019
Clearly what form Brexit takes (if it takes place at all!) will be the key influence on the economy next year, but our sense is that there is a bit more upside to GDP growth and the pound than widely believed. The UK may even outperform the rest of the …
21st December 2018
Brexit concerns may weigh more heavily on consumer spending over the next few quarters. But a further improvement in real earnings growth should put households’ finances on a more sustainable footing, as long as a Brexit deal is agreed. … Brexit concerns …
The economy isn’t as healthy as the unrevised 0.6% q/q rise in GDP in the third quarter suggests, but providing that a Brexit deal is reached, we think GDP growth will surprise on the upside next year. That should give a welcome boost to the public …
December’s further fall GfK/NOP consumer confidence adds to the evidence that Brexit uncertainty is weighing on consumers’ willingness to spend. However, given the strength of the labour market, and the recent rise in real wage growth, household spending …
A boost to retail sales in November from Black Friday saw sales record their largest monthly increase since May. Nonetheless, as this followed two consecutive monthly falls, the retail sector will end the year with a whimper. In fact, despite a strong …
20th December 2018
The thickening Brexit fog meant that the Monetary Policy Committee was always going to leave interest rates at 0.75% today and it looks as though that fog won’t fade for a few months. But should a Brexit deal be agreed, which we still think is just about …
A surge in sales of household goods due to Black Friday spending helped retail sales to rebound in November. But December might be a little weaker as consumers probably bought some Christmas presents early. … Retail Sales …
Thanks to the recent sharp drop in oil prices, the fall in inflation in November is likely to be the precursor to a larger fall in December. Inflation could even reach the 2% target, bringing some Christmas cheer both to the Bank of England and seasonal …
19th December 2018
MPs are increasingly pushing for the Government to change tack to break the current political impasse by stepping up “no deal” planning, considering a second referendum, forcing a general election or shifting to a softer Brexit. But parsing through all …
18th December 2018
Today’s announcement of a change to how student loans will be classified in the public finances increases the risk that the Government misses its main fiscal target. But this shouldn’t cause investors to take fright or prevent the Chancellor from …
17th December 2018
After another turbulent week in UK politics, we are no closer to knowing what form Brexit will take. Nonetheless, we think that the chances of a softer Brexit or no Brexit – which would be sterling and growth positive – have risen. … Amidst the chaos, …
14th December 2018
In normal times, the MPC would be preparing the ground for another interest rate hike. After all, pay growth has picked up far more sharply than the Bank of England had anticipated. But as it is still unclear how Brexit will pan out, the Committee seems …
We are not convinced by the argument that stockpiling ahead of Brexit will provide a big boost to GDP growth over the coming months and prompt an abrupt fall thereafter. Given that a large proportion of stocks are imported, we suspect it will have very …
13th December 2018
There are a myriad of different ways in which the UK political situation could play out. We can glean from recent markets moves that a disorderly Brexit would probably prompt sterling to fall further, but not collapse. The fact that bond yields have …
12th December 2018
The latest labour market figures suggest that a recovery in real pay growth is taking root. This supports our view that GDP growth will rebound next year if a “no deal” Brexit is avoided. … Labour Market …
11th December 2018
The weaker GDP figures for October seem to be mainly a reflection of the unwinding of some temporary factors which had boosted growth in Q3, rather than a significant slowdown in underlying activity. Nonetheless, there is little chance of a rebound in …
10th December 2018
The deterioration in the business surveys in November was probably partly driven by growing fears that the Brexit mess will not be sorted out in time to avoid a no deal rather than an actual fall in activity. Meanwhile, this week’s Brexit crunch-point …
7th December 2018
The deterioration in the business surveys in November was probably partly driven by growing fears that the Brexit mess will not be sorted out in time to avoid a no deal. As such, economic activity will probably not slow as dramatically as the surveys …
6th December 2018
Following the solid rise in GDP in the third quarter, the recent news has been disappointing. The business surveys suggest that output barely increased at all in November. And following a brief period of resilience, the news on household spending has …
5th December 2018
It is not too surprising that we have now reached the point where the Brexit shenanigans are weighing more heavily on activity. But we suspect the Markit/CIPS survey is overstating the slowdown in growth. … Markit/CIPS Services PMI …
