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The revelation that the Department for Exiting the EU (DExEU) has produced an assessment of the likely impact of various Brexit options on the economy has dominated the press this week, but does not really tell us anything new. A more significant …
2nd February 2018
We have long-argued that interest rates would rise somewhat faster, and sooner, than markets expecting. Recent comments by Governor Carney offer tentative support to this view and suggest that February’s Inflation Report could strike a more hawkish tone …
With the data continuing to surprise the Monetary Policy Committee (MPC) on the upside and the Governor sounding encouraged by progress in Brexit negotiations and a bit more upbeat on the outlook, there is a chance that the Inflation Report on February …
1st February 2018
The fall in the PMI in January suggests that manufacturing growth slowed a little at the start of the year. But the big picture is that the sector is still performing well by recent standards. … Markit/CIPS Manufacturing PMI …
January’s GfK/NOP confidence survey suggested that consumers started the year in fairly good spirits. And with real earnings likely to recover in the second half of this year, there is scope for confidence to pick up further and spending growth to regain …
31st January 2018
December’s household borrowing figures revealed a widening divergence between borrowing to fund a house purchase and borrowing to fund other areas of spending. However, we don’t think that policymakers will feel compelled to stamp out the rise in credit …
30th January 2018
A key reason why most forecasters were too gloomy about the UK economy last year was that Brexit-related uncertainty was much less damaging than they had expected. Judging by the gloominess of consensus forecasts for this year, they are about to make the …
29th January 2018
There are some reasons to think that the pound’s recent rally may struggle to go much further. Rising US interest rates could prompt something of a recovery in the ailing dollar, while Brexit uncertainty could rise again as the negotiations move on to the …
26th January 2018
The EU will publish its directives for negotiating a transitional arrangement on Monday, signalling the start of the next phase of negotiations. The UK Government seems prepared to accept the EU’s terms for a transition period which should allow it to be …
The preliminary estimate of Q4 GDP revealed that the economy picked up pace in the final three months of 2017, rounding off a solid, albeit unspectacular year. This supports our view that the consensus is too downbeat on growth in 2018 and that the MPC …
All the main balances of the CBI’s Distributive Trades Survey fell back in January. Nonetheless, the survey’s past relationship with the official figures continues to point to solid retail sales growth. … CBI Distributive Trades Survey …
25th January 2018
Stockbuilding probably knocked about 0.2pp off GDP growth last year. But there are a number of reasons to think that won’t be repeated, leaving us happy with our above-consensus forecast for GDP growth. … Will stockbuilding weigh on growth again this …
24th January 2018
The latest labour market figures provided further reassurance that the economy held up in the fourth quarter of last year. With survey indicators suggesting that jobs and wage growth should continue to pick up, we continue to expect the MPC to raise …
January’s CBI Industrial Trends Survey painted a relatively upbeat picture, suggesting that the manufacturing sector has carried a decent amount of momentum into 2018. … CBI Industrial Trends Survey …
23rd January 2018
December’s figures brought yet more good news on the current health of the public finances. And we think that stronger GDP growth will result in a more rapid improvement further ahead. … Public Finances …
December’s retail sales figures were pretty disappointing, suggesting that the sector grew by 0.4% in Q4 as a whole, half of Q3’s 0.8% rate. What’s more, growth in non-retail spending is likely to have been subdued in Q4 too. The rebound in car sales …
With the rise in the pound to its highest level against the US dollar since the eve of the EU referendum not appearing to be justified by relative interest rate expectations, some have argued that it may reflect investors becoming more optimistic, or …
19th January 2018
The recent rise in the pound against the dollar to almost $1.40, its highest level since the eve of the EU referendum, raises some concerns that a valuable source of support to economic growth – namely the boost from net trade – could soon be snuffed out. …
December’s retail sales figures were pretty disappointing. But some fall-back had always looked likely, given November’s hefty rise. And with inflation likely to have now peaked, the worst of the real pay squeeze should have passed, paving the way for a …
The fall-back in CPI inflation from 3.1% in November to 3% in December probably marks the beginning of what we expect will be a sustained downward trend over the course of 2018. Despite this, we still think that the Monetary Policy Committee (MPC) will …
16th January 2018
The possibility of a second referendum was again raised this week, but the chances of another vote happening appear slim. Meanwhile, we still expect a transitional deal to be agreed by March. But the UK’s ambition to maintain free trade in services …
12th January 2018
The recent spate of positive economic news has prompted some to raise their forecasts for Q4 quarterly growth to as much as 0.6%, double the average seen in 2017 so far. We have our doubts over whether GDP growth did grow by much more than Q3’s 0.4% rate. …
The latest hard data for Q4 supports the view that the UK economy maintained a reasonable amount of momentum, and offers some tentative signs that net trade may have provided a bigger boost to growth. … Industrial Production, Construction & Trade …
10th January 2018
December’s BRC Retail Sales Monitor suggested that Christmas trading failed to provide much relief to retailers with spending growth broadly in line with its subdued average over the past year, as the squeeze on real incomes has continued to leave …
9th January 2018
Recent evidence suggests that high-street spending has provided decent support to GDP growth in Q4. Admittedly, a weaker performance off the high street suggests that overall quarterly consumer spending growth probably slowed a little. But at least the …
5th January 2018
The latest survey evidence suggests that the economy ended 2017 on a reasonable footing. Indeed, despite a fall-back in both the manufacturing and construction PMI surveys in December, the all-sector PMI points to quarterly GDP growth of around 0.5%, a …
4th January 2018
November’s household borrowing figures will help to assuage fears that the slowdown in the housing market is gathering pace. And with consumers’ appetite for unsecured loans remaining strong, this provides another reason to think that consumer spending …
The rise in December’s Markit/CIPS services PMI provides some reassurance that the economy did not lose pace at the end of the year, following the disappointingly-weak manufacturing and construction surveys. And looking ahead, we expect the economy to …
December’s Markit/CIPS manufacturing survey suggests that the sector provided valuable support to GDP growth in Q4. … Markit/CIPS Manufacturing PMI …
2nd January 2018
While the latest Quarterly National Accounts has raised further questions about the sustainability of consumer spending growth, we think that consumers will continue to ride out the real pay squeeze well. … Consumer spending …
22nd December 2017
Christmas has come early with the ONS’ annual data deluge before the festive break. The upward revision to annual growth paints 2017 in a better light, while the latest data provided a more balanced growth picture for the third quarter. … Quarterly …
November’s public finances figures brought more good news on the current health of the public finances. And we think that stronger GDP growth will result in a more rapid improvement further ahead. … Public Finances …
21st December 2017
The slight fall in the GfK/NOP measure of consumer confidence in December is not cause for alarm. Indeed, the forward-looking balances were unchanged. And with inflation now likely to be at its peak, the squeeze on real wages should abate over the course …
This time last year, the consensus view was that the UK economy would grow by only 1% or so in 2017. But it now looks as though the economy will expand by a more reasonable 1.5%. Of course, there is a possibility that the negative effects of …
20th December 2017
The robust CBI Distributive Trades survey for December suggests that November’s strength in the official retail sales figures should be sustained in the final month of the year. … CBI Distributive Trades Survey …
December’s CBI Industrial Trends Survey painted a mixed picture for the manufacturing sector, with output expectations remaining weak despite order books continuing to swell. … CBI Industrial Trends Survey …
18th December 2017
The EU Council’s decision to sign off “sufficient progress” opens the door to agreeing a transition period, which would see the UK remain in the Customs Union and Single Market until 2021, early next year. But determining post-transition arrangements is …
15th December 2017
With inflation rising above 3% in November, there are some reasons to think that it has now reached a peak. It remains the case that the primary driver of the rise in inflation has been the slide in sterling. However, its impact does appear to be fading, …
With real incomes under pressure from subdued nominal pay growth and rising inflation, the strong rise in retail sales volumes in November is encouraging. However, spending on the high street might have come at the expense of non-retail spending. And in …
14th December 2017
As was widely expected, December’s Monetary Policy Committee meeting was a bit of a non-event. However, if we are right in expecting the economy to perform more strongly than the MPC expects, that should allow interest rates to be raised several more …
The official retail sales figures suggest that “Black Friday” discounts provided a significant boost to high-street spending in November. But consumers may now have done the bulk of their Christmas shopping, meaning that December’s sales could be weak. … …
While the 56,000 fall in employment in the three months to October was larger than the consensus expectation of a 40,000 drop, employment looks unlikely to continue to fall for much longer. Meanwhile, pay growth showed some tentative signs of a pick-up. … …
13th December 2017
While CPI inflation was higher than the consensus forecast and the MPC’s expectation in November, it has probably now peaked. As a result, there is little need for the MPC to raise interest rates again quickly in order to stamp out inflationary pressures. …
12th December 2017
There have been encouraging signs that stronger growth in manufacturing is helping to offset the slowdown in the consumer-facing parts of the services sector. Indeed, according to the Markit/CIPS surveys, other than brief periods in late-2007 and in 2011, …
8th December 2017
With the European Commission satisfied that “sufficient progress” has been made on the first phase of the Brexit negotiations, an important milestone on the road to Brexit has been reached. There are still many obstacles to overcome, but this supports our …
While the flurry of UK activity data was fairly disappointing, the industrial sector still looks on course to provide solid support to growth in Q4. … Industrial Production, Construction & Trade …
While the MPC is extremely unlikely to raise interest rates again at its meeting on 14th December, the key question is whether any of the nine committee members will vote for another hike so soon after the first rate rise in a decade in November. … MPC to …
7th December 2017
The Office for National Statistics confirmed that GDP grew by 0.4% in Q3 and the economy appears to have maintained its recent momentum so far in the fourth quarter. Indeed, November’s Markit/CIPS activity surveys indicate that quarterly GDP is on course …
5th December 2017
November’s set of Markit/CIPS surveys provide reassurance that the economy has held on to its recent momentum in the fourth quarter so far, rather than slowing any further. … Markit/CIPS Services PMI …
November’s BRC Retail Sales Monitor suggested that the real income squeeze may be constraining households’ discretionary purchases. But with inflation set to drop back in 2018, the outlook for consumer spending looks a bit brighter. … BRC Retail Sales …
