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The Bank of England is expected to publish an estimate of the neutral interest rate (i.e. the level at which rates have neither an expansionary nor a contractionary effect on growth and inflation) for the first time on 2nd August. A number of around 2% …
1st August 2018
Despite the slight fall in the headline balance of the Markit/CIPS manufacturing PMI in July, the survey still points to an improvement in the sector’s fortunes. … UK Markit/CIPS Manufacturing PMI …
July’s Gfk/NOP survey showed that consumers became a little less optimistic at the start of the third quarter. But with real wages set to pick up pace in the coming months, there is scope for confidence to improve and spending growth to regain some …
31st July 2018
June’s rise in mortgage approvals is too small to suggest that a revival in mortgage lending is underway. Meanwhile, the unsecured borrowing figures provide another reason to think that consumer spending rose solidly in Q2. But the figures will do little …
30th July 2018
The first activity surveys for July should provide a final bit of encouragement to the MPC to raise interest rates at its meeting next Thursday. Elsewhere, the EU’s Chief Negotiator, Michel Barnier, ruled out key components of the Government’s Brexit …
27th July 2018
While a vote to raise interest rates on 2nd August is unlikely to be unanimous, we think that the Monetary Policy Committee (MPC) will press ahead with the second interest rate rise since July 2007. … MPC to press ahead with second rate rise in a …
26th July 2018
Although the more extreme warnings about the short-term impact of a “no-deal” Brexit on the economy are overdone, there is little doubt that it could deal a reasonable blow to GDP growth next year. … How much damage would a Brexit “no deal” …
25th July 2018
The UK Government’s Chequers proposals are still broadly intact following a tumultuous week in Parliament. The Prime Minister suggested that the proposals would also solve the Northern Ireland border problem. But the EU first wants to focus on a backstop …
20th July 2018
The financial markets are probably right to assume that an interest rate rise in August is still more likely than not. Somewhat counterintuitively, lower inflation might make it easier for the MPC to raise rates, as it will relieve the pressure on …
June’s public finances figures showed that government borrowing is still on track to undershoot the Office for Budget Responsibility’s (OBR’s) 2018/19 forecast. As such, it seems likely that the Chancellor will have a bit more room for manoeuvre in the …
June’s retail sales figures were a little weaker than expected, with sales volumes falling by 0.5% on the month. However, some fall back in June always looked likely after two consecutive large monthly increases in April and May. And sales still rose by …
19th July 2018
The big quarterly rise in retail sales volumes in Q2 has provided yet more evidence that a consumer revival is now underway. … Retail Sales …
With sustained rises in real wages now in prospect, real consumer spending growth should accelerate again. Of course, Brexit-related uncertainties and their economic effects could intensify over the coming quarters, particularly if Brexit turmoil results …
18th July 2018
The lower-than-expected rate of CPI inflation means that a hike in interest rates in August is less clear cut. However, we still think that it remains more likely than not. … Consumer Prices & Producer Prices …
The final set of labour market figures before the Monetary Policy Committee’s (MPC’s) August meeting will not deter the Committee from pressing ahead and raising interest rates. … Labour Market …
17th July 2018
May’s GDP figures this week confirmed that the economy is starting to regain some momentum. That said, growth was still pretty anaemic, raising the possibility that the Monetary Policy Committee could back away from raising interest rates in August. But …
13th July 2018
The betting markets are assigning a greater probability to an early general election in the UK in the wake of high-profile resignations in the Conservative Party since the Cabinet met at Chequers on Friday. Nonetheless, this hasn’t altered the view in the …
10th July 2018
Although GDP came in a touch below the consensus expectation in May, it still looks likely that quarterly growth in Q2 will be in line with the Monetary Policy Committee’s (MPC’s) expectation. As a result, we continue to expect the Committee to raise …
The proposals expected to come out of the Cabinet meeting at the Prime Minister’s country retreat, Chequers, are unlikely to be accepted by the EU. But the decision to align UK product standards with those of the EU is an important change in the …
6th July 2018
An encouraging set of Markit/CIPS surveys provided further evidence that the economy has rebounded in Q2. Meanwhile, in a speech this week, Bank of England Governor, Mark Carney, appeared to reinforce market expectations that an interest rate rise in …
The improvement in all three Markit/CIPS PMI surveys in June provided further signs that the economy has rebounded after the weak start to the year. Indeed, the all-sector PMI rose from 54.3 in May to 55.0, suggesting that quarterly GDP growth has …
5th July 2018
June’s Markit/CIPS services survey provided further signs that the economy has rebounded after the weak start to the year and keeps the Monetary Policy Committee (MPC) on track to raise interest rates in August. … Markit/CIPS Services PMI …
4th July 2018
June’s manufacturing PMI suggests that the sector has rebounded from a disappointing Q1. And the forward-looking balances provided some encouragement that the outlook for the sector has improved. … UK Markit/CIPS Manufacturing PMI …
2nd July 2018
There was nothing in the comments made by MPC members this week, nor in the latest data releases, to make us alter our view that the MPC will raise interest rates on August 2 nd . Admittedly, Jonathan Haskel’s testimony in front of the Treasury Committee …
29th June 2018
Housing market activity, and therefore mortgage lending, remains subdued. But growth in unsecured household borrowing maintained its pace in May. And still-solid consumer confidence suggests that it will accelerate ahead, and provide increased support to …
Despite the upward revision to Q1 GDP growth, the breakdown left the economy looking a little more fragile than before. But there are still reasons to be optimistic about the growth outlook. … Quarterly National Accounts …
June’s GfK/NOP survey showed that consumer confidence dipped at the end of Q2. But with real wages set to rise more strongly towards the end of the year, sentiment and consumer spending growth should pick up from here. … GfK/NOP Consumer Confidence …
The Financial Policy Committee’s (FPC’s) biannual assessment of financial stability found that the banking sector is in good health, and should be able to withstand a disorderly Brexit. As a result, the Committee left the Counter-Cyclical Capital Buffer …
27th June 2018
The Government this week managed to avoid giving Parliament the right to direct negotiations were the UK to end up heading towards a “no-deal” Brexit. But next week’s EU Council summit will highlight that the Government needs to alter its current stance …
22nd June 2018
The hawkish tone of this week’s MPC Minutes supports our long-held view that the Committee will raise rates in August. Elsewhere, this week’s CBI Industrial Trends Survey provided us with some reassurance that a rebound in manufacturing growth in Q2 is in …
While the Monetary Policy Committee (MPC) stopped short of explicitly committing to a rate hike in August, the hawkish tone of June’s Minutes & Statement suggest that it is pretty likely. … MPC on track for an August …
21st June 2018
May’s public finances figures not only confirmed that the new fiscal year is off to a good start, but also that borrowing in 2017/18 was lower than previously thought. As such, the Chancellor should be able to deliver an increase in health spending whilst …
We had expected the recent upward trend in nominal pay growth to come to a brief halt in April due to unfavourable base effects. But the drop in the annual growth rate of average earnings (excluding bonuses) from 3.0% in March to 2.5% in April was pretty …
15th June 2018
The rebound in retail sales volumes so far in Q2 has provided us with some encouragement that consumer spending growth has regained some pace after the weak start to the year. Meanwhile, wage growth has started to rise again in real terms, with increases …
14th June 2018
An interest rate rise on 21st June looks unlikely. The Monetary Policy Committee (MPC) will probably want to wait at least a few more months for news on the economy’s health before hiking rates. But provided that the economy holds up well, then we expect …
May’s retail sales figures have added to the evidence that consumer spending growth has regained some pace following the softness at the start of the year. … Retail Sales …
The recent slowdown in money growth could be taken as evidence that economic growth will weaken further. However, it is not unheard of for economic growth to hold up well even when money growth is slowing, and there are a number of reasons to think that …
13th June 2018
The rise in oil prices has brought the recent downward trend in CPI inflation to a halt. But we doubt it will be too long before inflation starts to drift down again. … Consumer Prices & Producer Prices …
Another strong set of employment figures in April suggests that firms remain positive about the outlook for demand despite the economy going through a soft patch at the start of the year. … Labour Market …
12th June 2018
The early hard data for Q2 will have done little to reassure the Monetary Policy Committee (MPC) that the slowdown in Q1 will prove temporary. But the surveys suggest that some rebound is in store. … Industrial Production, Construction & Trade …
11th June 2018
The EU has shunned the Government’s backstop proposal for the whole of the UK to remain in the EU’s customs territory at the end of the transition period. It seems to us that this forces the Government into a straight choice between accepting the need for …
8th June 2018
Economic growth of 0.4% or so in Q2 – as suggested by the latest business surveys – would normally be pretty respectable. But coming after Q1’s snow-related slowdown, it looks a little soft. What’s more, if growth has been boosted by some “catch-up” after …
The news on the economy has improved considerably over the past few weeks. Indeed, May’s PMI surveys suggest that GDP growth could accelerate to 0.4% or so this quarter, up from 0.1% in Q1. Meanwhile, the retail sales, consumer credit and consumer …
5th June 2018
May’s Markit/CIPS report on services provides us with further reassurance that the weakness in GDP growth in Q1 will prove temporary and increases the chances of the MPC pressing ahead with an interest rate hike in August. … Markit/CIPS Services PMI …
May’s BRC Retail Sales Monitor reported the strongest year-on-year increase in sales in over a year, suggesting that consumers are embracing the end of the real pay squeeze. … BRC Retail Sales Monitor …
Abstracting from the effects of the snow in Q1, the big picture remains one of very feeble consumer spending. But things are starting to look up. CPI inflation now appears to be on a firm downward trajectory. And there have been clearer signs of a revival …
4th June 2018
While the fall in gilt yields over the past fortnight partly reflects an increase in safe haven demand, expectations for future interest rates have also slipped back. It seems unlikely, though, that an increase in euro-zone tensions will alter the …
1st June 2018
May’s Markit/CIPS manufacturing survey suggests that the sector is putting in a strong performance in Q2, after the poor start to the year. … UK Markit/CIPS Manufacturing PMI …
Unsecured lending to households rebounded in April, providing some reassurance after the unusually small rise in March. That chimes with other evidence that a consumer revival is in the pipeline. … Household Borrowing Monitor …
31st May 2018
May’s GfK/NOP survey showed that consumers are still in pretty good spirits, providing some reassurance that the economy got back on track again in Q2 after the weak start to the year. … GfK/NOP Consumer Confidence …
