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July’s public finances brought some cheer for the Chancellor after the run of fairly poor outturns seen so far this fiscal year. But this will probably prove to be just a temporary blip, rather than the start of a more sustained improvement. … Public …
22nd August 2017
Recent rapid growth in car finance has left the industry looking more vulnerable to a downturn. But this type of lending is a small proportion of total borrowing. And with car finance deals shifting the risk from banks to car companies, the implications …
21st August 2017
On the face of it, the two further position papers published this week by the Department for Exiting the EU, on Northern Ireland and potential future customs arrangements, point to a fairly soft form of Brexit in regards to trade. However, both the …
18th August 2017
Despite relatively sluggish GDP growth in the first half of 2017, jobs growth has maintained a solid pace, with the unemployment rate having now fallen below the Monetary Policy Committee’s (MPC) estimate of its “equilibrium” rate. Accordingly, with …
July’s retail sales figures were fairly encouraging given the ongoing squeeze on consumers’ real incomes and suggest that talk of a sharp consumer slowdown has been overdone. … Retail Sales …
17th August 2017
The latest labour market figures showed some signs that the tightening in the labour market may be at long last leading to a recovery in wage growth and provide us with optimism that the real pay squeeze should come to an end next year. … Labour Market …
16th August 2017
In contrast to a number of other forecasters who have suggested that the pound could reach parity with the euro before the end of the year, we think that there are a number of reasons for the pound to reverse some of its recent losses against the euro. … …
15th August 2017
Although CPI inflation held steady in July, we still think that it will inch up a bit further before the end of this year, as well as outpace wage growth for a while yet. … Consumer Prices & Producer Prices …
Sterling has fallen by 7.5% against the euro since mid-May. The fall comes despite relative interest rate expectations pointing to a strengthening of the pound against the single currency. But while conventional monetary policy looks likely to be …
14th August 2017
Ahead of the publication of the UK Government’s next batch of position papers, there has been little in the way of Brexit developments this week. Meanwhile, the latest economic data was rather mixed, although it suggests still that the economy should …
11th August 2017
Given that there have been few signs in the hard data yet of a rebalancing towards the external and corporate sectors, the fate of the economy – in the near term at least – still seems to rest in the hands of the consumer. Reassuringly, though, despite …
This Focus discusses what we have learnt about the Brexit negotiations so far. It addresses four key questions. First, are there now signs that Brexit worries are weighing on the economy? Second, how are the negotiations going? Third, what ‘sort’ of …
The recent slowdown in house price growth looks unlikely to develop into outright falls, and as such shouldn’t undermine our relatively upbeat forecasts for consumer spending and investment. … Will the housing market slowdown weigh on the …
10th August 2017
Today’s deluge of data from the ONS was a bit of a mixed bag. While the manufacturing sector is still underperforming the surveys, and construction output was weaker than expected, net trade looks to have provided more support in Q2. … Industrial …
While the fall in the pound hasn’t yet boosted net trade, there are signs that the external sector will soon start making positive contributions to GDP growth. The depreciation should also support continued strength in corporate profits and, with …
8th August 2017
Following yesterday’s weak Visa expenditure data, it was reassuring to see that the BRC’s survey of retailers still points to resilient growth in retail sales volumes. … BRC Retail Sales Monitor …
Much of the focus of the press conference following the Bank of England’s August policy decision and Inflation Report was on the contribution of Brexit to the downgrade of its near term growth forecast. A closer look at the forecasts reveals that it was …
4th August 2017
The surprisingly-dovish reaction of sterling to the Bank of England’s August Inflation Report has led some commentators to conclude that the prospect of an interest rate hike this year is now dead and buried. However, while our central forecast assumes …
While the Monetary Policy Committee (MPC) remained split on whether to increase interest rates at August’s meeting, the hawks are likely to remain in a minority for a while longer yet. Nonetheless, we still think that the first hike will come earlier than …
3rd August 2017
After a fairly meagre 0.3% expansion in Q2, the economy looks to have made a reasonable start to Q3. Indeed, rises in both the manufacturing and services sector PMIs in July left the all-sector PMI consistent, on the basis of past form, with quarterly GDP …
After the recent run of softer economic news, the improvement in the Markit/CIPS services survey in July provides reassurance that the economy has maintained the momentum it gathered over Q2. … Markit/CIPS Services PMI …
July’s Markit/CIPS manufacturing PMI suggests that growth in the sector has accelerated after the disappointing performance in Q2. It also implies that the fall in the pound is boosting external demand, while resulting price pressures are easing. … …
1st August 2017
June’s household borrowing figures provide another reason to think that the consumer slowdown shouldn’t be too severe. But the figures will clearly add to concerns about household debt. … Household Borrowing Monitor …
31st July 2017
The view on both sides of the channel seems to be that agreeing the terms of the UK’s withdrawal will take longer than initially hoped. As a result, a transitional deal allowing freedom of movement and the jurisdiction of the ECJ in the UK for a period …
28th July 2017
Once again the business surveys provided an over-optimistic reading of the economy’s health in the second quarter. This raises questions about their usefulness as a leading indicator, and suggests that we should perhaps put less weight on their current …
Despite growing concerns about the economic outlook, consumers remain upbeat about their own financial position. As a result, we still think that the slowdown in household spending growth this year won’t be too severe. … GfK/NOP Consumer Confidence …
While the softer tone of recent economic data may not be enough to prevent another split on the Monetary Policy Committee at August’s meeting, it supports our view that the MPC is still a way away from raising interest rates. … Sluggish GDP growth to keep …
27th July 2017
July’s CBI Distributive Trades Survey suggests that retail spending started Q3 on a solid footing and should be able to maintain recent rates of growth. … CBI Distributive Trades Survey …
We had expected nominal pay growth to remain pretty sluggish – but not to start slowing! Since this is most likely to have been due to the exchange-rate induced rise in import costs, the slowdown should prove temporary. But with more persistent factors at …
The first estimate of Q2 GDP revealed that the economy gained a little bit of momentum in the second quarter, but growth is still too weak to prompt the Monetary Policy Committee to hike interest rates in the near future. … Preliminary estimate of GDP …
26th July 2017
The CBI Industrial Trends Survey continues to suggest that the recent weakness in the hard manufacturing data will soon be reversed. And the quarterly balances suggest that the improvement will be maintained throughout Q3. … CBI Industrial Trends Survey …
25th July 2017
While the second round of negotiations made little substantive progress towards a final agreement, it did highlight the areas where there is the most work to do. Meanwhile, economic data suggested that the economy has continued to prove resilient to the …
21st July 2017
The markets are probably right to conclude that June’s drop in inflation, from 2.9% to 2.6%, has reduced the likelihood of an imminent rate rise. Admittedly, the dip in inflation needn’t rule out a rate hike at the MPC’s August meeting. For a start, the …
June’s figures suggest that the public sector finances have started to deteriorate a little. This could limit the scope for an easing in austerity and mean that fiscal policy will still provide a significant drag on GDP growth over the next few years. … …
The squeeze in real wages looks likely to intensify as inflation continues to rise to around 3%. However, nominal spending should continue to hold up well, supported by strong employment growth, resilient consumer confidence and low borrowing costs. In …
20th July 2017
June’s retail sales figures suggest that recent talk of a marked consumer slowdown has been overdone and provides another reason to think that next week’s GDP figures should reveal a re-acceleration in overall growth in Q2. … Retail Sales …
Consumer spending growth looks set to slow further this year as the real pay squeeze intensifies. But this should be offset by a stronger contribution from net trade and investment. There is a risk that uncertainty thrown up by the Brexit vote and the …
19th July 2017
While June’s unexpectedly large drop in CPI inflation is unlikely to prove a turning point, it will nonetheless help to keep the MPC’s hawks in the minority. … Consumer Prices & Producer Prices …
18th July 2017
With the effects of the lower pound appearing to be fading at the start of the production line, CPI inflation looks to have almost peaked already and we think that it will gradually start to head down towards the 2% target from next year. … Can consumers …
17th July 2017
Comments from Eurosceptic MPs revealing their indignation at paying an “exit bill” to the EU should not be conflated with the Government’s position. Indeed, the Government seems willing to make concessions in order to ensure that Brexit is a smooth …
14th July 2017
While the fall in the pound has yet to provide a significant boost to overall net trade, it has already started to support the tourism sector. And we think that net tourism spending will provide a small boost to GDP growth in the coming quarters, helping …
Despite May’s labour market figures suggesting that the economy is close to full employment, the continued weakness of wage growth provides some ammunition to the more dovish members of the Monetary Policy Committee. … Labour Market …
12th July 2017
The relatively upbeat tone of June’s retail sales monitor adds to other evidence that retail sales volumes re-accelerated at the end of Q2. And there are signs that shop price inflation has already begun to stabilise. … BRC Retail Sales Monitor …
11th July 2017
The disappointing tone of this week’s survey evidence and hard economic data has raised concern that the economy is now succumbing to Brexit fears. However, there were probably some non-Brexit related factors at play. And growth should still see some …
7th July 2017
Despite the dip in this week’s Markit/CIPS PMI surveys for June, they still provided some reassurance that growth will pick-up in Q2. But this week’s hard data for the industrial and construction sectors were far from encouraging. As a result, while we …
Today’s flurry of activity data casts some doubt on the likely strength of the bounce-back in GDP growth in Q2 and adds to the likelihood that rates will stay on hold at the next MPC meeting in August. … Industrial Production, Construction & Trade …
While there is no urgency for the MPC to dampen inflationary pressures, the extraordinary starting point of policy and general resilience of the economy suggest that UK interest rates are likely to rise a bit sooner and a bit more quickly than markets and …
6th July 2017
The incoming economic data appeared to take a bit of a turn for the worse over the past month, with the headline balances of all three Markit/CIPS PMIs falling in June. What’s more, consumer confidence fell to the lowest level since the immediate …
June’s UK Markit/CIPS report on services still suggests that GDP growth has reaccelerated in Q2, after the sharp slowdown experienced in Q1. … Markit/CIPS Services PMI …
5th July 2017
June’s Markit/CIPS manufacturing PMI suggests that growth in the sector accelerated in Q2, following the slowdown in Q1. However, it raised some questions about the sustainability of this faster rate of growth. … Markit/CIPS Report on Manuf. …
3rd July 2017
