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The impact of a no deal Brexit on the economy would depend on what sort of no deal it was, but there would be at least some negative effect in the short term. If the UK left the EU on bad terms, the damage could be substantial. But this would be a one-off …
8th October 2018
The latest evidence points to GDP growth picking up from 0.4% in Q2 to 0.5% in Q3. That would make it the strongest quarter since the end of 2016. Even so, the economy would still be on track for a poor performance this year overall. Our forecast is for …
5th October 2018
The Markit/CIPS all-sector output PMI was more or less unchanged in Q3 compared to Q2, consistent with GDP growth remaining steady at 0.4% q/q. However, we think that growth was a little bit stronger than this. The official data showed that rolling …
4th October 2018
The drop back in September’s Markit/CIPS report on services was a little disappointing but a bit of a fall was expected after a large jump in August. The bigger picture is that growth in the services sector is holding up pretty well. … Markit/CIPS …
3rd October 2018
The rebound in the manufacturing PMI in September suggests that the sector will no longer drag on growth in Q3. What’s more, the export orders balance recovered much of last month’s sharp fall, suggesting that Brexit concerns are not weighing on external …
1st October 2018
August’s household borrowing figures provided further signs that consumers’ appetite for unsecured borrowing is waning. But the slowdown is arguably a welcome development since it eases concerns that unsustainable rises in borrowing will lead to a sharper …
The latest Quarterly National Accounts showed that real household incomes and savings have recovered a little from their recent weakness. And with a further improvement in prospect, that should put consumer spending growth on a more sustainable footing. … …
28th September 2018
The Labour Party announced a new policy at their conference this week that would see companies transfer some of their shares to employees. While this policy in isolation might not be too damaging for business, it comes on top of a swathe of others that …
The GDP figures were pretty disappointing and with plenty of downside risks to the outlook, we doubt the Bank of England will be in any hurry to raise rates again soon. … GDP: Quarterly National Accounts …
Some of the drop in September’s GfK/NOP consumer confidence survey can be put down to worries over Brexit. But provided a deal is stuck, we do not think this marks the start of a lasting trend and remain confident that we will soon see a gradual recovery …
There are now only six months left to negotiate the deal under which the UK will leave the EU and move into a transition period. This Update lays out five key questions and answers on what still needs to be done, and the pitfalls that could lead to a …
27th September 2018
We estimate that Brexit uncertainty has knocked about 0.5 percentage points off GDP growth in the two years since the referendum through its impact on investment. Provided a deal is struck as we expect, the release of pent up investment could provide a …
24th September 2018
Theresa May’s combative comments in a surprise press conference earlier today indicated that the chances of a no deal scenario have risen, causing the largest one-day fall in the pound in eleven months. Indeed, the two sides remain far apart, meaning that …
21st September 2018
The unexpected rise in inflation in August came as a bit of a nasty surprise. But we still think that the Monetary Policy Committee (MPC) can afford to sit tight until Brexit uncertainty has been resolved, before raising interest rates again. If the …
Retail sales volumes rose in August despite the boost to sales from July’s warm weather and the World Cup unwinding. Indeed, while food sales fell in August, this was more than made up for by the largest monthly jump in sales of household goods since May …
Borrowing was higher than expected in August, marking the end of a run of strong figures. Despite the rise in borrowing in August, it is still on track to come in below the Office for Budget Responsibility’s forecast over the fiscal year as a whole. … …
Despite inflation ticking up in August, prolonging the squeeze on real incomes, retail sales volumes increased. … Retail Sales (Aug.) …
20th September 2018
The unexpected rise in CPI inflation came as a bit of a nasty surprise, but it does not alter our view that inflation will be back at the 2% target by this time next year. … Consumer Prices & Producer Prices …
19th September 2018
While Michel Barnier, the EU’s Chief Negotiator, raised hopes that a Brexit deal will be secured soon, we suspect that an agreement is still some way off. This feeds into our forecast that sterling will pull back to $1.25 and €1.09 by end-2018. This is …
14th September 2018
The Monetary Policy Committee (MPC) does not appear to be in a rush to raise interest rates again soon. Indeed, our assumption that a Brexit deal will be struck at the eleventh hour will probably prevent the MPC from lifting rates again until next year. … …
13th September 2018
Pay growth ended its recent soft patch in emphatic style in July, with underlying pay growth reaching its joint-highest pace since 2008. This suggests that competition for workers is finally starting to provide greater support to wages. … Labour Market …
11th September 2018
The worst bit of austerity is behind us, but it is by no means over. There are powerful reasons for taking further action to reduce the public sector debt burden. So we think that the Government will fend off pressures to loosen the public sector purse …
10th September 2018
The stronger-than-expected GDP figures for July suggest that the economy continued to shrug off Brexit-related uncertainty at the start of Q3. That gives us confidence in our forecast that the economy will grow at a steady pace for the remainder of the …
Following a weak run of data, evidence that the services sector continued to grow at a robust pace in August provided some reassurance that economic growth will maintain a steady pace for the remainder of the year, in line with our forecast. Meanwhile, …
7th September 2018
The Monetary Policy Committee (MPC) is unlikely to increase interest rates at its meeting on 13th September so soon after the last rise. In fact, given our assumption that a Brexit deal will only be struck at the eleventh hour, we doubt the MPC will move …
6th September 2018
The survey evidence suggests that the economy has maintained its momentum in Q3 thus far. The improvement in the Markit/CIPS services survey in August came as a bit of a relief after the recent run of poor economic data. The increase in the services PMI …
While elevated inflation weighed on consumer spending in the first half of 2018, a modest recovery in spending growth is in the pipeline. As the labour market continues to tighten, wage growth will rise further. And although the fall back in inflation has …
The improvement in August’s Markit/CIPS report on services came as a bit of a relief after the recent run of poor data on the economy and suggested that the services sector is holding up better than the industrial sector. … Markit/CIPS Services PMI …
5th September 2018
The rises in energy and agricultural commodity prices and sterling’s recent fall will put some upward pressure on inflation, but we doubt that these factors will prevent it from easing from 2.5% now to about 2.0% in 2020. Admittedly, in the event of a “no …
4th September 2018
The fall in the headline manufacturing PMI, from a downwardly-revised 53.8 in July to 52.8 in August, leaves the survey pointing to little improvement in the manufacturing sector’s fortunes. Indeed, the reading is the lowest since the sharp fall recorded …
3rd September 2018
The EU Chief Brexit Negotiator, Michel Barnier’s suggestion that the EU is ready to offer the UK a bespoke Brexit deal has provided some reassurance that the UK is not heading for a disruptive “no deal” exit from the EU in March 2019. However, we are …
31st August 2018
The latest GfK/NOP confidence survey suggested that consumers were in fairly good spirits in August. And while Brexit uncertainty may weigh more heavily on confidence in the coming months, a gradual rise in real earnings growth should boost confidence and …
July’s household borrowing figures provided signs that consumers’ appetite for unsecured borrowing is waning. But the fact that households remain upbeat about their financial position suggests that any slowdown in borrowing growth shouldn’t be too severe. …
30th August 2018
Amid the Brexit gloom and doom this week there was at least some positive news for the Chancellor. The continued strong performance of the public finances in July suggests that he will be able to deliver the announced increase in healthcare spending …
24th August 2018
July’s public finances figures leave borrowing on course to come in comfortably below the OBR’s forecast this year, suggesting that the Chancellor should have room to manoeuvre in the Autumn Budget. … Public Finances …
21st August 2018
We have reassessed our view on the likely timing of a Brexit deal. Our working assumption is now that a deal is reached at the eleventh hour in Q1 2019, rather than in the autumn. However, we doubt that Brexit uncertainty will knock the economy off …
17th August 2018
The stronger-than-expected 0.7% monthly increase in retail sales volumes in July took the annual growth rate up from 2.9% to 3.5% and suggests that some recovery in consumer spending growth is in the pipeline. Online promotions gave a boost to non-store …
16th August 2018
The stronger-than-expected increase in retail sales volumes in July suggests that some recovery in consumer spending growth is in the pipeline. … Retail Sales …
As expected, CPI inflation ticked up for the first time since November last year in July. But as much of the rise was due to higher energy prices – which we doubt will be sustained – inflation should fall back gradually ahead. … Consumer Prices & Producer …
15th August 2018
This summer has been the warmest in more than a decade, prompting speculation that the hot weather might have given an extra boost to consumer spending. In general, though, there is very little evidence to suggest that hot summers boost consumer …
14th August 2018
Today’s labour market figures showed that the recent surge in employment has petered out and that real wage growth remains subdued, casting doubt over the likely strength of any recovery in consumer spending growth. But we still think that a gradual …
Our central scenario envisages a smooth departure from the EU on 29th March 2019. But that outcome is far from certain. And although the more extreme warnings about the short-term impact of a “no deal” Brexit on the economy are probably overdone, there is …
10th August 2018
The GDP figures confirmed that the economy bounced back after the weak start to the year and will reassure the Monetary Policy Committee that it was right to raise interest rates last week. … GDP: First Estimate …
The macroeconomic impact on the UK of the tariffs which the US has already imposed on the EU and of the retaliatory tariffs which the EU has imposed on the US, will be trivial. The threat of escalating protectionism is a concern for the future, but it is …
8th August 2018
There are still umpteen ways Brexit could play out, meaning that the cloud of uncertainty over the UK could linger for a long time yet. While the UK economy has weathered Brexit and political uncertainty well in the past, the longer it carries on, the …
7th August 2018
While we still assume that the UK and the EU will reach some sort of agreement over Brexit before the deadline next spring, there is clearly a significant possibility of no deal. In this scenario, we would expect sterling to fall a lot further, but UK …
The recent improvement in the public finance figures begs the question of whether the economy is faring better than the official growth figures suggest. However, it is not strong tax receipts driven by a booming economy that are responsible for the …
6th August 2018
After the recent run of upbeat economic news the Monetary Policy Committee’s decision to raise rates this week came as little surprise. And the hawkish tone of the Minutes and Inflation Report lent some support to our view that interest rates are likely …
3rd August 2018
Despite falling in July, the Markit/CIPS services survey suggests that the economy made a reasonable start to Q3, sustaining the pace of growth reached in Q2 of about 0.4% q/q. … Markit/CIPS Services PMI …
Despite the Monetary Policy Committee (MPC)’s hawkish forecasts accompanying the second rise in interest rates for a decade, markets are still anticipating only a very modest pace of monetary policy tightening over the coming years. We continue to think …
2nd August 2018
