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The soft tone of the labour market figures should temper expectations of a near-term interest rate rise following yesterday’s relatively hawkish comments by some MPC members. Although the fall in unemployment may be a one-off, slower jobs growth would be …
15th July 2015
June’s consumer prices figures showed that the UK is continuing to benefit from a period of very low inflation brought on by lower energy and import prices. There are still no signs that low inflation reflects a more general economic malaise. … Consumer …
14th July 2015
June’s BRC retail sales figures suggest that consumer spending made another chunky contribution to GDP growth in the second quarter. What’s more, rising real incomes and strong confidence should continue to buoy the consumer recovery. … BRC Retail Sales …
Given the ongoing troubles in the euro-zone and fears about a slowdown in China, one could be forgiven for adopting something of a gloomy mood. However, there are plenty of reasons to remain cheerful about the prospects for the UK’s economic recovery. … …
13th July 2015
Despite being unshackled from the constraints of the coalition, the Chancellor chose pragmatism over ideological fervour in last week’s Budget. As well as easing the pace at which borrowing is set to fall over the coming years, he pushed through net tax …
10th July 2015
Good news on the trade deficit in May was tempered by signs the construction sector’s recovery is struggling to get back on track. But since both sets of statistics are erratic, we would caution against concluding that net trade will be a sustained source …
The Summer Budget confirmed that consumers face an imminent ramping-up of the fiscal squeeze. But there are still reasons to remain optimistic that the recovery in spending won’t be derailed. … Can the consumer recovery survive a renewed fiscal …
9th July 2015
Despite the Chancellor’s decision to smooth the fiscal squeeze in yesterday’s Budget, the Monetary Policy Committee (MPC) is likely to continue to keep interest rates on hold until next year. Austerity will still be a big drag on the economy over the next …
This was not as radical a Budget as many had feared and some had hoped. It was, as the Chancellor presented it, a “One Nation” Budget. From the macroeconomic viewpoint, the most important aspect was the smoothing of the intended fiscal tightening across …
8th July 2015
May’s industrial production figures provided further reassurance that the economic recovery managed to gather pace in the second quarter despite the stronger pound and euro-zone debt crisis. … Industrial Production …
7th July 2015
As far as the UK is concerned, the main point to take from last week’s Greek developments wasthat there are still limited signs of contagion to the rest of the euro-zone. So far, so not-too-badthen, although we will wait to see how this week’s instalment …
3rd July 2015
The latest labour market data provided further evidence that the recovery in wages now has momentum. Indeed, the headline (three-month average of the annual) growth rate in average weekly earnings picked up to 2.7% in April, the strongest since August …
June’s Markit/CIPS report on services provided further reassurance that the slowdown in GDP growth in Q1 was just temporary and that the Greek crisis has so far had little bearing on the recovery’s overall pace. … Markit/CIPS Report on Services …
There is probably a greater chance of Angela Merkel becoming Prime Minister of Greece than the MPC raising interest rates this month. And while a couple of MPC members look set to respond to the recent pick-up in earnings growth by voting to hike rates …
2nd July 2015
The Budget on 8th July will be all about providing the details of the second stage of austerity and hopes have been building that Mr Osborne will smooth the profile of the spending cuts. But the Chancellor has clear political incentives to get austerity …
1st July 2015
June’s disappointing Markit/CIPS report on manufacturing suggested that the industrial side of the economy is playing no role in the economic recovery at themoment – indeed, it may even have dragged on overall GDP growth in the second quarter. But this …
The household spending recovery is doing even better than was previously estimated. Admittedly, spending has recently been driven by falling saving. But it should not be long until the spending recovery is built on firmer foundations. … Consumer …
30th June 2015
The national accounts showed that the recovery has more momentum than previously thought. And while the fall in household saving and huge current account deficit suggested that recent growth has relied on some temporary props, we remain confident that the …
The upbeat tone of June’s GfK consumer confidence survey suggests that household spending should continue to grow robustly in the near term and is another reason to think that the overall economic recovery got back on track in Q2. … GfK/NOP Consumer …
May’s fairly weak household borrowing figures provided further reassurance that therecovery in household spending is not founded upon an unsustainable pick-up incredit growth and is another reason to think that the Monetary Policy Committee canwait until …
29th June 2015
Given the air of uncertainty hanging over Europe, it is perhaps surprising that markets haverecently brought forwards their expectations for the timing of the first hike in official interest ratesin the UK. This is partly in response to MPC member Martin …
26th June 2015
The weakening in June’s CBI Distributive Trades Survey just reflected the balances returning to a more realistic level. The big picture is that retail sales volumes still seem to be growing at a fairly healthy rate. … CBI Distributive Trades Survey …
25th June 2015
At 5.5%, the unemployment rate is getting close to past estimates of its ‘natural rate’, i.e. the rate at which further falls become incompatible with the inflation target. Indeed, the stronger labour market is why MPC member Martin Weale this week said …
24th June 2015
The UK has become significantly more exposed in recent years to the Chinese economy, which has made a poor start to 2015. But this shouldn’t cause the UK economy too many problems – Greece remains by far the biggest external threat. … UK faces bigger …
23rd June 2015
Despite the weaker tone of June’s CBI Industrial Trends Survey, it still suggests that the manufacturing sector’s recovery found some renewed momentum in the second quarter, after virtually grinding to a halt in Q1. … CBI Industrial Trends Survey …
The odds of Greece defaulting on its debt, and possibly exiting the euro-zone too, seem to be growing by the day. However, as we have stressed before, the UK’s direct economic and financial exposures to Greece are small. Granted, the UK would probably …
19th June 2015
May’s public finances figures brought some more good news to the Chancellor ahead of his first Budget of the new parliament on 8th July. However, with a long way to go in order to restore the public finances to better health, a major re-intensification of …
Alongside strong employment growth and virtually zero inflation, households are now enjoying a significant recovery in wage growth. Annual growth in average weekly earnings excluding bonuses picked up to 2.7% in the three months to April – the strongest …
18th June 2015
The Chancellor’s announcement regarding the amount of money withdrawn from pensions since the new freedoms took effect in April supports our view that the changes will provide a boost, but a relatively small one, to household spending. … Pension reforms …
The conventional wisdom is that when the US Fed changes interest rates, the UK MPC usually follows suit soon after. However, the historical record contains several exceptions to this pattern. And as the MPC emphasised in its latest minutes, its actions …
17th June 2015
The latest labour market figures contained further signs of a pick-up in nominal wage growth. If this continues without any recovery in productivity, then a rate rise could come back on the table this year. However, we remain optimistic about the scope …
May’s consumer prices figures showed that deflation lasted for just one month, but the big picture is that inflation is set to remain extremely low during the rest of 2015. … Consumer Prices & Producer Prices …
16th June 2015
One area of debate surrounding the UK’s productivity puzzle regards whether the UK’s weak productivity growth is confined to just a few sectors or is a more widespread problem. We still think that there is scope for productivity across most of the economy …
15th June 2015
Last week’s announcement by the Chancellor that he intends to pass a law to require all future governments to run a budget surplus “in normal times” engendered more accusations that he is playing politics with economic policy. However, the principle of …
12th June 2015
The latest construction output figures supported our judgement that the economic recovery has had more pace than recent GDP estimates had indicated. Given the broad-based strength of the business surveys, we still think that there is scope for the first …
May’s inflation figures should show that deflation in the UK lasted for just a month. Admittedly, this would not mean that the risk of a prolonged period of low inflation has suddenly disappeared. However, we still think that the chances of this are quite …
11th June 2015
April’s industrial production figures provided more evidence that GDP growth is rebounding in the second quarter after its weakness in Q1. … Industrial Production …
10th June 2015
April’s trade figures should have provoked a bit of a sigh of relief. Although the near-term outlook for the external sector does not look fantastic, at least net trade this quarter looks unlikely to repeat Q1’s big negative contribution to overall GDP …
9th June 2015
May’s BRC retail sales figures indicated that consumer spending is growing much more slowly than households’ incomes. But with unemployment low and confidence high, we still think that the income boost to spending will increase this year. … BRC Retail …
There are good reasons to think that food price inflation has reached a trough. That said, intense supermarket competition seems unlikely to lift soon, meaning that inflation in the sector could remain below-average for some time. … Has food price …
8th June 2015
Given the rollercoaster profile for government spending inherited from the coalition, there is clear scope for the Government to smooth the fiscal consolidation more evenly over this parliament. Admittedly, the Conservatives limited their room for …
5th June 2015
With the UK in deflation, growth indicators turning south and the Greek saga casting a shadow over the outlook, the MPC’s decision to keep interest rates on hold is likely to have been unanimous again. And while a return of inflation towards its target …
4th June 2015
The recovery in car sales has lost momentum this year despite the fact that the cost of credit is about as cheap as it can get. But the healthy outlook for households’ incomes, the low level of oil prices and the old age of vehicles on the road suggests …
Although net trade dragged on GDP growth in the first quarter, a more encouraging development from the point of view of a rebalancing of the economy was the 1.7% quarterly rise in real business investment. We remain optimistic about the investment …
3rd June 2015
The unexpected fall in May’s Markit/CIPS report on services shows that the economic recovery is still a bit fragile. However, there are no obvious reasons why the economy should be seeing a sustained slowdown and so we remain optimistic that the recovery …
Growth in household borrowing is beginning to strengthen in response to record-low lending rates and high levels of confidence. And since this revival is coming from a low base and household incomes are growing strongly, there is no need for the Monetary …
2nd June 2015
May’s Markit/CIPS report on manufacturing provided further evidence that the economic recovery is extremely dependent on the services sector at present. … Markit/CIPS Report on Manufacturing …
1st June 2015
Last week ended with a general sense of relative pessimism, following the lack of the expected upgrade to Q1’s GDP figure and the news that net trade was a big drag on the economy. But we are not too worried by either of these developments. Significant …
29th May 2015
While the composite index of the GfK consumer confidence survey softened in May, it remained at a high level by past standards and so still indicates that consumers are likely to spend virtually all of the strong growth in their real incomes this year. …
Since June’s meeting of the Monetary Policy Committee (MPC) comes just three weeks after the publication of the latest Inflation Report and recent data have not challenged its view that inflation will return only slowly to target, the Committee is …
28th May 2015
