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We think that the upward revision to the MPC’s inflation forecast was about the right magnitude. But for the Committee to respond to this – or a greater – overshoot of the target, domestic costs pressures would also have to rise. We think that GDP growth …
4th November 2016
The unanimous decision by the MPC to leave interest rates and its asset purchases on hold in November did not come as a surprise given the continued run of upbeat news on the health of the economy. And while the MPC will be watching closely for any …
3rd November 2016
The latest business surveys suggest that the economy maintained its strength at the start of Q4. Gains in both the Markit/CIPS services and construction PMIs in October left the economy-wide composite PMI looking consistent with quarterly growth in GDP of …
October’s Markit/CIPS report on services suggests that the economy got off to a good start in the fourth quarter and is probably the final blow for a cut in Bank Rate at today’s Monetary Policy Committee meeting. … Markit/CIPS Report of Services …
While the fiscal cost of cutting Value Added Tax (VAT) would be quite high, it could provide theeconomy with valuable support by limiting the rise in inflation and associated real income squeeze. … What would be the impact of a cut in …
2nd November 2016
Consumer spending growth is unlikely to maintain its recent strength in the year ahead. But supportive credit conditions should prevent spending from slowing too sharply, with past monetary loosening continuing to feed through to lower borrowing costs. … …
October’s Markit/CIPS manufacturing survey suggests that the sector’s post-referendum contraction will prove short-lived. And the fall in the pound should helpthe economy to rebalance towards manufacturing in time. … Markit/CIPS Report on Manuf. …
1st November 2016
September’s household borrowing figures highlight that the housing market has started to stabilise and that consumers’ appetite for debt hasn’t taken much of a hit following the referendum. And while a deterioration in household’s perception of the …
31st October 2016
This week’s economic data brought confirmation that the immediate economic impact of the vote to leave the EU has not been nearly as severe as many had initially expected and gives us reason to be optimistic that the economy should not lose too much pace …
28th October 2016
There are some reasons why the recent fall in the pound will be less positive for the economy than that seen after 1992’s ERM exit. But there are also reasons to think that it might be more positive than that seen after the 2008 financial crisis. … 1992 …
The recent run of relatively upbeat economic data culminated last week with the preliminary estimate of Q3 GDP, which was stronger than even we had been expecting. Of course, there are some good reasons to not read too much into these figures. Growth was …
While consumer confidence fell a little in October, the headline balance is still high by past standards and points to strong retail sales growth at the start of Q4. … GfK/NOP Consumer Confidence …
The resilience of the economy in Q3, combined with a stronger inflation outlook, will probably be enough to persuade a majority of MPC members to leave rates unchanged at next week’s meeting. What’s more, while we would not rule out the possibility of …
27th October 2016
October’s CBI Distributive Trades Survey gives us another reason to be optimistic that the economy should not lose too much pace in the fourth quarter. Nonetheless, there are anumber of headwinds which could put a lid on spending growth ahead. … CBI …
Today’s GDP figures confirmed that the immediate economic impact of the vote to leave the EU has not been nearly as severe as many had initially expected. … Preliminary estimate of GDP …
As one of the most timely and frequent indicators of household spending growth, attention naturally falls on the monthly retail sales numbers to gauge the strength of activity in the consumer sector. But these figures seem to be painting a …
26th October 2016
The CBI Industrial Trends Survey for October and Q4 suggests that the uncertainty created by the Brexit vote is weighing on the manufacturing sector, but that the fall in the pound will help manufacturers deal with this uncertainty. … CBI Industrial …
24th October 2016
This week’s economic data broke from the recent upbeat trend, with inflation jumping up and the latest public finances figures highlighting the challenge that the Chancellor faces in the Autumn Statement. Indeed, it will be tricky to provide support to …
21st October 2016
It’s been a long time coming, but we will finally get the official verdict this week on how much economic growth has slowed in the third quarter following the referendum outcome. Encouragingly, the gamut of data has provided evidence that the slowdown has …
September’s public finances figures set the tone for a fairly disappointing set of fiscal forecasts likely to be revealed in the Autumn Statement next month. But this won’t prevent the Chancellor from scaling back the pace of austerity. … Public Finances …
Consumer spending growth is unlikely to maintain the strength seen since the referendum in the coming quarters. Real household incomes are likely to take a hit, with employment intention surveys consistent with a sharp slowdown in employment growth. …
20th October 2016
While retail sales remained flat in September, spending on the high street held up well over Q3 as a whole. However, it seems unlikely that this strength will last in the face of softer employment and wage growth and higher inflation. … Retail Sales …
August’s labour market data showed that the EU referendum still hasn’t provided much of a hit to the jobs recovery. But surveys suggest employment growth will slow further in the coming months which should contain wage growth. … Labour Market …
19th October 2016
Apparent concerns in the bond market that the Monetary Policy Committee (MPC) has gone soft on inflation look overdone. We expect the forthcoming rise in inflation to be transitory. But if it isn’t, the Committee will take the action needed to meet its …
18th October 2016
The rise in CPI inflation in September – to its highest level in almost two years – is likely to fuel market concerns about the upward impact of the pound’s fall on prices. However, we don’t think that it will trouble the MPC too much. … Consumer Prices & …
Another dramatic week in the Brexit saga saw the pound fall further, bond yields rise, the chance of another Scottish independence referendum before long build and Marmite almost get pulled off the shelves. That said, with the economic case for Scottish …
14th October 2016
The further fall in sterling over the past week or so will add to the inflationary pressures already set to build over the next few years. The drop in the exchange rate will have both direct and indirect effects on consumer prices, as wholesalers and …
August’s construction figures suggest that the sector is dragging on GDP growth. What’s more, construction’s fortunes are unlikely to improve much in coming quarters as the Brexit vote weighs on the sector. … Construction Output …
The evidence so far has supported our view that the immediate economic impact of the vote to leave the EU would not be as severe as most had expected. And although there are many challenges ahead – not least rising inflation – further support from …
We suspect that the forces which have pushed gilt yields higher in recent weeks have now largely runtheir course. Accordingly, we expect yields to end both this year and next close to current levels. … Will gilt yields carry on …
11th October 2016
While September’s BRC Retail Sales Monitor continued to paint an upbeat picture of consumer spending at the end of Q3, some slowdown ahead looks inevitable. … BRC Retail Sales Monitor …
Markets have been shaken this week by the fallout from the Conservative Party Conference, which revealed that policymakers are set to take the UK down the “hard” Brexit route. By contrast, the economic data has remained relatively upbeat. … Brexit Watch: …
7th October 2016
There are at least three good reasons why the chance of another rate cut this year by the MPC has receded. First, the incoming economic data has been better than expected. Second, there are growing concerns about a more disorderly sterling “crisis” and …
While August’s industrial production and trade data provided a break from therecent run of positive data, the economy still appeared to weather the Brexit votebetter than most expected in Q3. … Industrial Production & Trade …
Both survey and hard data published this month suggest that GDP will grow moderately in Q3, avoiding too sharp of a slowdown from Q2’s upwardly-revised quarterly rate of 0.7%. Indeed, the 0.4% monthly expansion of the services sector in July’s official …
5th October 2016
September’s Markit/CIPS services survey added to other evidence suggesting tha tthe post-referendum economic slowdown has not been too severe. While it perhaps reduces the likelihood of another rate cut in November, other policy support – notably from the …
The first raft of economic data covering the post-referendum period has been fairly robust. But not all sectors have been performing well, with the construction sector still in the doldrums. … Can the construction sector dig itself out of …
3rd October 2016
While the pound’s latest dip has partly reflected concerns over the prospect of a “hard Brexit”, thecurrency’s depreciation should continue to cushion the economic impact of the vote to leave the EU. … Still no need to worry about the …
The Markit/CIPS manufacturing PMI for September showed that both the domesticand export-facing parts of the manufacturing sector are weathering the Brexit vote well. And the sector should contribute to an expansion in GDP in Q3. … Markit/CIPS Report on …
This week provided some further indications that policymakers are leaning towards a harder form of Brexit package than initially anticipated. However, the UK at least appears to be headed into negotiations from a position of relative economic strength. … …
30th September 2016
In contrast to the mostly upbeat data on the state of the economy after the Brexit vote, the housing market still appears to be cooling. But we don’t think house prices or transactions will fall too much further than they already have. … Will the housing …
The latest Quarterly National Accounts showed that consumer spending held up well ahead of the referendum. Looking ahead, although we expect some slowdown, there are a number of factors which should prevent a sharp downturn in spending over the next year …
Today’s Quarterly National Accounts and Balance of Payments figures for Q2 showed that the economy was even more resilient ahead of the EU referendum than previously thought, although it remained unbalanced. … National Accounts & Balance of Payments …
Consumer confidence bounced back to pre-referendum levels in September in another sign that households are shaking off their initial post-Brexit vote blues. … GfK/NOP Consumer Confidence …
The recent surge in the money supply has caused some commentators to suggest that the MPC’s current monetary policy stance is far too loose. But we think that this rapid rise should prove to be temporary and that the MPC won’t be too concerned about it. … …
29th September 2016
The latest data suggest that gold buying from the official sector recovered somewhat in August but overall demand in the year to date remains subdued. That said, we think that the case for gold as a strategic reserve asset remains strong. … Household …
September’s CBI Distributive Trades Survey suggests that the recent strength in retail sales growth won’t last for much longer. But the survey hasn’t been an especially good guide of retail sales, so may well be overstating the extent of any slowdown. … …
27th September 2016
It is almost six months since the introduction of the National Living Wage (NLW) and the initial impact on employment and wages in the retail sector does not appear to be particularly severe. But its impact is still set to grow over time and retailers …
26th September 2016
This week brought another wave of robust economic data and further evidence that sterling’s slideseems to be providing a boost for manufacturers. Meanwhile, there have been further mixed signalscoming from the Government on its Brexit strategy, suggesting …
23rd September 2016
The UK economy may be in a bit of a post-referendum “sweet spot” in which some of the positive developments which we have expected to cushion the impact of the vote – including MPC action and the drop in the pound – have been felt before the major adverse …
