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Large variations between the different official measures of GDP growth have left it unclear whether the UK economy accelerated or slowed following the EU referendum. And a renewed divergence between the survey and official data has raised similar …
28th March 2018
There appears to be a developing consensus that the degree of permanent scarring from the financial crisis is worse than initially thought and that the UK economy has been condemned to the slow lane forever more. However, we think that many forecasters …
27th March 2018
As expected, on Friday the EU Council endorsed a transition period and the opening up of a new strand of negotiations on the future relationship. But unless the UK can come up with a solution to the Northern Ireland border issue, under the terms of the …
23rd March 2018
With another hike in interest rates in May now largely priced into markets (and supported by this week’s Monetary Policy Committee (MPC) Minutes), the bigger question is just how “limited and gradual” the rise in interest rates will be thereafter. Markets …
February’s retail sales figures showed that spending growth has been fairly feeble so far this quarter. As such, it would now take a monthly increase in excess of 2% in March to see sales in Q1 match Q4’s 0.5% rise. But this seems extremely unlikely given …
22nd March 2018
While the Monetary Policy Committee (MPC) stopped short of explicitly committing to another interest rate hike in May, the Minutes of March’s meeting suggest that it is highly likely. … MPC still on track for a May …
Despite February’s bigger-than-expected rise in retail sales volumes, the big picture is that spending growth is still pretty sluggish. But with the real pay squeeze coming to an end, the outlook for spending is looking up. … Retail Sales …
The easing in output expectations among manufacturers in the CBI’s Industrial Trends Survey suggests that the boost to manufacturing output from the pound’s depreciation has faded somewhat. But given the survey has undershot the hard data recently, and …
21st March 2018
January’s labour market figures provided clearer signs of a revival in earnings growth, suggesting that it won’t be long before we start to see sustained rises in real pay. Meanwhile, government borrowing remains on track to undershoot the OBR’s forecast …
The fall-back in CPI inflation in February from 3% in January to 2.7% confirms that we have now reached a turning point, but doesn’t significantly diminish the case for a near-term interest rate hike. … Consumer Prices & Producer Prices …
20th March 2018
It is widely expected that the EU Council will on Thursday confirm that the UK will enter into a transition period following its departure from the EU next March. That said, judging by the EU’s latest draft of the withdrawal agreement, any agreement would …
16th March 2018
Following November’s Autumn Budget, we argued that the Office for Budget Responsibility (OBR) had become too pessimistic about the outlook for economic growth. Although the economy has performed better than expected, while the public finances have …
While the Bank of England’s Financial Policy Committee (FPC) left its annual stress test scenario unchanged, the test will still be a bit more stringent this year for some major UK banks. Nonetheless, it seems unlikely that these banks will be required to …
With no Monetary Policy Committee (MPC) meeting scheduled in April, its meeting on 22nd March will be the last opportunity for the MPC to lay the groundwork for another interest rate hike in May. Markets are pricing in around a 70% chance of one. But with …
15th March 2018
While the Office for Budget Responsibility’s (OBR) latest forecasts failed to deliver the expected “growth windfall”, the Chancellor still managed to maintain an upbeat tone in the Spring Statement and set the stage for a slight easing in the fiscal …
13th March 2018
This checklist is intended to help clients keep track of the key economic and fiscal forecasts announced during the Chancellor’s Spring Statement at 12.30pm Tuesday 13th March 2018 and to provide some instant context. Note that following the Chancellor’s …
12th March 2018
Draft EU guidelines on the future relationship between the UK and the EU reiterated that the EU sees a Canada-style Free Trade Agreement as the best possible trading arrangement consistent with the UK leaving the Single Market and Customs Union. … EU …
9th March 2018
The likely dent to retail sales, spending on consumer services and construction output as a result of February’s bad weather will make the economy look fragile. But the hit to the economy will be cushioned by households spending more to heat their homes. …
January’s output data was disappointing. That said, the manufacturing sector is still growing strongly by past standards, while the surveys continue to point to GDP growth holding broadly steady. … Industrial Production, Construction & Trade …
While it is some way off yet, some have argued that the ending of compensation related to mis-sold PPI will remove a valuable support to consumers who are facing falling real wages and higher interest rates. However, a near-term pick-up in compensation …
7th March 2018
Things seem to be going the Chancellor’s way at the moment (for a change). Not only did GDP grow more strongly in 2017 than the Office for Budget Responsibility (OBR) predicted, and the public finances improve at a faster rate, but productivity has also …
6th March 2018
Following a downward revision to quarterly GDP growth in Q4, from 0.5% to 0.4%, a deterioration in all three of the headline PMI balances in January raised concerns that growth had continued to slow at the start of the year. But those fears were assuaged …
February’s BRC Retail Sales Monitor tentatively suggests that spending growth is turning a bit of a corner. And with the worst of the pay squeeze having passed, the outlook for growth is looking up. … BRC Retail Sales Monitor …
The rise in the services PMI in February will help to assuage fears of a broad-based slowdown in Q1, instead suggesting that the economy has broadly maintained its pace. That should keep the door open for the Monetary Policy Committee to hike interest …
5th March 2018
On the basis of this week’s developments, an agreement on a transition deal by the March European Council meeting hangs in the balance. Meanwhile, the Brexit vision that the Prime Minister set out on Friday contained less “cakeism” than earlier speeches, …
2nd March 2018
Recent data have raised fears that the long-awaited recovery in the manufacturing sector is coming to an end before it really had a chance to get going. One possible explanation for the recent weakening in the surveys is that the boost from the lower …
January’s household borrowing figures will help to assuage fears that the slowdown in the housing market is gathering pace. And consumers still appear confident enough to borrow to smooth their spending. … Household Borrowing Monitor …
1st March 2018
While household spending growth slowed markedly in 2017, the outlook for 2018 and beyond looks brighter. Indeed, the worst of the real pay squeeze appears to have passed. Following a peak of 3.1% in November 2017, CPI inflation has started to fall back …
February’s manufacturing PMI suggests that the sector has lost some momentum in Q1. But the details of the survey were more encouraging, and there is little sign in the latest money and credit figures that this weakness is broadening out to the rest of …
Consumer confidence edged back down in February, but the big picture remains that consumers are still weathering the squeeze on their spending power relatively well. … GfK/NOP Consumer …
28th February 2018
The “Canada plus, plus, plus” deal, including single market participation for some sectors, which UK Cabinet ministers reportedly agreed to this week is unlikely to be accepted by the EU in its current form. … Cabinet consensus won’t unlock …
23rd February 2018
Recent news on the UK economy, including the downward revision to Q4 GDP growth, appears to have lent more support to the consensus forecast of slower growth in 2018 than to our prediction of an acceleration. But it’s too early to throw in the towel. Not …
Despite the fall back in the headline reported sales balance, the survey still points to retail spending growth at least maintaining its current pace. And the forward-looking balances paint an upbeat picture. … CBI Distributive Trades Survey …
22nd February 2018
The second estimate of Q4 GDP revealed that the economy grew by a downwardly revised 0.4% q/q in the final quarter of 2017, with annual growth revised down from 1.8% to 1.7%. Encouragingly, however, investment growth has remained strong. And with …
Although unemployment rose in December, employment continued to grow strongly and the surveys suggest that this pace of growth will be sustained in the coming months. Meanwhile, government borrowing still looks on track to undershoot the OBR’s forecast …
21st February 2018
February’s CBI Industrial Trends Survey suggests that the growth of manufacturing output may have slowed a bit at the start of the year. But the big picture remains that the sector is still performing well by recent standards. … CBI Industrial Trends …
20th February 2018
Given that the UK Government has disagreements with the EU over the scope of the transition deal, and no new solutions to avoiding a hard border on the island of Ireland have been proposed, there is a risk that next week’s negotiations, which focus only …
16th February 2018
Inflation proved unexpectedly sticky in January, remaining unchanged at 3.0%, contrary to the consensus expectation for it to fall. However, we don’t think that the Monetary Policy Committee (MPC) needs to worry about runaway inflation. Indeed, sterling’s …
It is always a challenge to get a proper reading of the underlying strength of consumer spending growth around this time of year, with changing seasonal sales patterns (including the introduction of Black Friday) altering shopping habits. The survey …
With real incomes under pressure from weak nominal pay growth and above-target inflation, it isn’t surprising that high-street spending growth has continued to lose momentum. But the worst of the real pay squeeze should now have passed, paving the way for …
Having barely slowed in 2017, contrary to predictions of a substantial negative impact from the Brexit vote, we think that the economy will defy renewed expectations of a slowdown this year. Amid strong global growth and low interest rates, net trade and …
13th February 2018
Despite holding steady in January, we continue to think that CPI inflation will gradually drift downwards over the course of 2018. However, we still think that the Monetary Policy Committee will raise interest rates by more than markets expect. … Consumer …
While the sell-off in financial markets over the past week or so has been abrupt, we don’t think that it currently poses a big threat to the economic outlook. The relationship between equity prices and GDP growth is not particularly strong, and the …
9th February 2018
This week saw negotiations resume for the first time since the EU Council agreed in December that talks could move on to a possible transition period. However, UK Government objections to some of the terms offered by the EU for the transition period mean …
The deluge of hard data for December provides further evidence that it was the domestic demand and the services sector that drove the pick-up in growth in Q4. However, temporary distortions mean that we expect industrial production and net trade to …
The “Super Thursday” releases from the Bank of England support our long-held view that the Monetary Policy Committee would become less dovish as the economy beat expectations. Indeed, we expect the next hike to come in May and, with the MPC wanting to …
8th February 2018
2017 was a fairly dismal year for consumers. With prices rising more quickly than wages, consumer spending growth has halved since 2016. But is the worst of the squeeze now behind us, or is there further financial strain to come? We think that inflation …
7th February 2018
The survey evidence released so far paints a pretty downbeat picture for growth at the start of the year. Indeed, falls in the manufacturing, construction and services sector PMI left the all-sector index consistent, on the basis of past form, with …
6th February 2018
January’s BRC Retail Sales Monitor suggests that high-street spending growth maintained a steady pace at the start of 2018. But with inflation set to fall back this year, easing the squeeze on real incomes, there is scope for a pick-up in spending growth …
Following falls in the manufacturing and construction surveys released last week, the weak January services sector survey suggests that the economy lost the momentum it gained in Q4 at the start of 2018. However, we doubt that this is a sign of things to …
5th February 2018
