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Talk of a UK interest rate cut has resurfaced in recent weeks, following the deterioration in global market sentiment and the moves by other central banks to cut rates. There is certainly scope for the Bank of England to cut rates further, but we think …
17th February 2016
The soft UK pay growth shown in today’s labour market figures – which is still at odds with the tightening labour market – highlights why the MPC won’t be raising rates anytime soon … Labour Market Data …
January’s consumer prices release showed the UK moved further away from deflation – due to easing fuel price deflation rather than a core-price inflation rise. … Consumer Prices & Producer Prices …
16th February 2016
The boost to consumers’ spending power from low energy prices is set to fade this year. What’s more, households face a big fiscal squeeze. And with unemployment nearing its natural rate, there is less scope for strong growth in employment to drive …
12th February 2016
The further bout of financial market turmoil last week has raised fears that a sharp slowdown in the UK economy may be on the horizon. But the strength of the labour market, loose monetary policy and the prolonged boost to households’ spending power from …
January’s consumer prices figures should show a continuing movement away from deflation. While falling oil prices are being passed through to lower fuel prices at the pump, fuel price deflation will continue to ease due to larger falls a year ago. … …
After contracting in the first three quarters of 2015, the UK manufacturing sector just managed to pull out of recession in the fourth quarter. But overall production experienced its worst quarter for three years. … Industrial Production …
10th February 2016
Over the past few weeks, markets appear to have pushed back their expectation for the timing of the first hike in UK interest rates all the way to Q3 2019, and there has been some speculation of a rate cut in the near term. This stands in contrast with …
9th February 2016
December’s trade figures provide further evidence that the UK’s economic recovery remained reliant on the domestic services sector in Q4 2015. While we think fears of a sharp global slowdown are overdone, progress in reducing the trade deficit is likely …
Following a fairly disappointing Christmas period, January’s BRC sales figures suggested that consumers started the year on a strong footing. But with temporary props set to fade, spending growth in 2016 is unlikely to be spectacular. … BRC Retail Sales …
Contrary to what many newspaper headlines claimed after the Autumn Statement towards the end of last year, we have not reached the end of austerity. Not in the slightest. However, we think that the economy should weather the second stage of fiscal …
8th February 2016
The draft EU deal published last week has left the “Brexit” referendum looking likely to occur in June this year. What’s more, on the basis of the latest polls, it looks set to be a close vote. That said, we doubt that Mr Cameron’s deal changes either the …
5th February 2016
Today’s “Super Thursday” announcements were generally dovish but, true to form, Governor Carney gave mixed messages, striking a more hawkish tone at the press conference. While market expectations have changed very little, our view is that a hike in Bank …
4th February 2016
While we are positive about the prospects for productivity growth, we don’t think workers will fully benefit from this and the gains will only partially feed through to higher wage growth. This means that growth in unit labour costs should stay muted and …
3rd February 2016
Financial markets got off to a tumultuous start to the year, but the economy has begun 2016 on a slightly stronger footing. The Markit/CIPS surveys point to quarterly GDP growth of around 0.6%, a slight pick-up on recent rates. And consumer confidence …
January’s Markit/CIPS report on services provided further evidence that the economic recovery has started 2016 on a slightly stronger note. But firms have become a bit more wary about the near-term outlook, which could in turn reinforce the MPC’s caution …
Today’s publication of a draft deal on the UK’s EU negotiations is another step towards a referendum as soon as June. The modest proposed reforms will probably leave the vote very close. If the UK did vote to leave, we would see some big negative effects …
2nd February 2016
The tumble in inflation from the most recent peak of just over 5% in late-2011 to an average of 0% in 2015 has provided a welcome boost to the economy. But with near-zero rates of inflation now in the rear-view mirror, this favourable tailwind will not …
On the face of it, December’s household borrowing figures will not have eased mounting concerns regarding rapid unsecured credit growth and the sustainability of the consumer recovery. However, we do not yet consider the current expansion of consumer …
1st February 2016
The January Markit/CIPS manufacturing survey showed that the sector started 2016 on a slightly better footing. But with headwinds to the sector remaining, any near-term improvement is likely to be moderate. … Markit/CIPS Report on Manuf. (Jan.) & Money …
The composition of GDP growth in the fourth quarter of 2015 highlighted the lack of progress in rebalancing the economy. And we think the near-term prospects aren’t much better. But we do believe the potential for more balanced growth further out is …
29th January 2016
Yesterday’s GDP figures showed that growth in Q4 was entirely driven by the services sector, suggesting that consumer spending continued to shoulder the economic recovery at the end of last year. And today’s GfK Consumer Confidence Survey provided some …
January’s consumer confidence figures support our expectation that household spending will continue to grow at a solid rate in 2016. But consumption growth will probably be a bit slower than in 2015 as austerity ramps up and the stimulus from earlier …
The messages from this month’s Inflation Report will probably be pretty mixed. A lower profile for growth and inflation over the next few quarters should cement expectations that an interest rate rise soon is off the agenda. In contrast, a stronger …
28th January 2016
Following December’s disappointing official retail sales figures, January’s CBI Distributive Trades Survey does not signal much of a pick-up in sales during the post-Christmas clearance period. But we still expect the consumer recovery to get back in …
The preliminary estimate of UK GDP in Q4 confirmed that the recovery ended last year on a slightly lacklustre note, with growth a bit below its trend rate and still driven entirely by the services sector. … Preliminary estimate of GDP …
The pick-up in unsecured borrowing growth is starting to ring alarm bells, but we do not think that this poses a major threat – at least not yet. … Consumer credit not a concern …
27th January 2016
The CBI Industrial Trends Survey for January and Q1 showed that manufacturing didn’t leave its troubles behind in 2015. But the sector’s prospects do appear a little brighter. … CBI Industrial Trends Survey (Jan. & …
25th January 2016
At the end of another tumultuous week in global financial markets, one of the most notable developments in the UK has been the further drop in interest rate expectations. But even after the shaky start to the new year, we still think that a rate rise in …
22nd January 2016
The official UK retail sales figures once again painted a different picture of high-street spending to anecdotal and survey evidence – this time indicating a far weaker month for retail sales in December. Despite retailers’ best efforts to draw in …
While the latest figures brought some better news on the public finances, the Chancellor still looks likely to overshoot his target this year. Meanwhile, despite the sharp fall in retail sales in December, high-street spending still rose robustly in Q4. …
The recent slowdown in the pace of deficit reduction seems to reflect both timing effects and a weaker economic performance than anticipated. Although progress may remain slow in the near term, we still expect stronger economic growth further ahead to …
21st January 2016
The latest labour market figures showed that pay growth is still weaker than it was a few months ago. Given falling unemployment and the prospect of a rebound in inflation, this should be temporary, so a rate rise is still possible within the next few …
20th January 2016
Today’s figures showed that strong labour market activity did not prevent a further slowdown in pay growth, suggesting that an interest rate hike is still some way off. … Labour market data …
December’s consumer prices release confirmed that deflation is in the rear-view mirror, but there aren’t yet any signs which will worry the MPC. … Consumer Prices & Producer Prices …
19th January 2016
While the start of the new year has not been a particularly happy period, we think that concerns related to growth in China and subsequent market turmoil have been overdone. This turmoil would appear to add to the challenges being faced by the UK economy …
15th January 2016
December’s consumer prices figures should confirm that the UK’s brief period of deflation is over, by showing the second consecutive month of positive CPI inflation. What’s more, the recent further fall in oil prices is unlikely to cause a return to …
The MPC’s decision to leave interest rates on hold at 0.5% today, for the 82nd month in a row, was unsurprising given the recent fall-back in the oil price and renewed market concerns about the health of the global economy. Indeed, these risks underline …
14th January 2016
The range of survey and anecdotal evidence out so far suggests that growth in high-street spending over the festive period as a whole was fairly reasonable. It is also clear that the gulf between growth in online and in-store sales (with “clicks” …
The easiest way to cut the government debt ratio would be to let economic growth do the work. Yet this could take decades. Cutting it faster would mean running smaller deficits at first, then surpluses, as in Mr Osborne’s fiscal rule. But future …
13th January 2016
A shift in market interest rate expectations, a spate of weak economic data and the looming “Brexit” vote are probably all partly to blame for sterling’s recent weakness. Although the currency looks set for a bumpy ride this year, we expect sterling to …
After a dire performance through much of 2015, November’s industrial productionfigures suggest no change in the manufacturing sector’s fortunes. … Industrial Production …
12th January 2016
The latest BRC retail sales figures suggest that December was a reasonable, but hardly spectacular, end to a strong year for high-street spending. It appears that consumers did not exhaust their Christmas shopping list off the back of “Black Friday” …
2016 won’t be an easy year for the UK economy, given the renewed fiscal squeeze and probable EU referendum in particular. Nonetheless, we expect it to weather these clouds relatively well and anticipate GDP growth of about 2.2%, close to last year’s rate. …
11th January 2016
Last year ended with some fairly downbeat news on public borrowing and economic growth. But has the news flow since then been any more encouraging? So far the answer is not particularly. The start of 2016 brought with it some downbeat survey evidence …
8th January 2016
UK GDP growth looks like it slowed sharply in 2015. At first glance, this appears strange considering many factors – such as energy price falls – were supportive of growth. But, it looks like these were more than offset by other factors, including a …
November’s improved trade figures are unlikely to be sufficient for the external sector to support the economy in Q4. And further ahead, the economic recovery looks set to remain reliant on domestic demand. … Trade …
The fall in oil prices, a souring in global market sentiment, weaker wage data and some unfavourable revisions to GDP growth suggest that the chances of rates not rising until the second half of the year have risen. Indeed, we now only expect one hike …
7th January 2016
The National Accounts released at the end of last year suggested that the economic recovery has less momentum than previously thought and still looks very unbalanced. Real GDP in 2015 is now on course to have expanded by only 2.2% or so – a fairly …
6th January 2016
