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Whilst the second estimate of Q1 GDP confirmed that household spending growth slowed a touch at the start of the year, rising nominal wages, falling unemployment and the boost from lower food and energy prices should ensure that spending maintains a solid …
28th May 2015
The lack of any upward revision to GDP in Q1 was a bit disappointing, but the figures will probably still be revised further ahead. Meanwhile, the big drag from net trade was hardly good news, but the domestic economy looks fairly healthy. … GDP: Second …
One upside risk to inflation is that the Conservatives try to plug some of the hole in the public finances by raising taxes on goods and services in the CPI basket. But given that they have ruled out a VAT hike, this effect shouldn’t be too large. In any …
27th May 2015
While the Conservatives’ victory removed some of the uncertainty hanging over the economy, it has some more worrying implications – such as the renewed fiscal squeeze and the EU referendum. But we think that the recovery will take these threats broadly in …
The very strong tone of the latest CBI Distributive Trades Survey suggests that the recovery in consumer spending gathered pace in the second quarter. And there are reasons to be optimistic about the outlook for the rest of this year too. … CBI …
26th May 2015
News that the UK economy finally experienced deflation in April is to be cheered – it is emphatically of the ‘good’ sort, driven by cheaper commodity prices rather than weaker demand. Looking ahead, there are still no signs that deflation is set to linger …
22nd May 2015
While April’s figures bring more good news on the current health of the public finances, a major and painful re-intensification of the fiscal squeeze will still be required for the Government to obtain an overall budget surplus in this parliament. … …
There is little reason to expect the strong growth in consumer spending seen so far this year to ease off soon. The latest business surveys indicate that employment will continue to grow rapidly over the coming months. At the same time, slack in the …
21st May 2015
April’s retail sales figures offer another reason to think that the economic recovery is not fizzling out. And with the fundamental drivers of spending looking good, we expect the consumer recovery to maintain a solid pace over the rest of the year. … …
The Conservatives have made their job of eliminating the budget deficit by 2018/19 even harder by announcing a number of unfunded policy pledges in the run-up to the election. But the fact that they have only committed to meet them by the end of the …
20th May 2015
The minutes of May’s MPC meeting supported the message from last week’s Inflation Report that the most likely next move in interest rates will be up, but not for some time. Although two members still look close to renewing their previous call for an …
Households have rarely had it so good – no inflation, strong jobs growth, reviving earnings, a breather from austerity and falling borrowing costs. As a result, we think that real household spending could grow by a solid 3% this year, the most for a …
19th May 2015
The UK has finally joined other advanced economies in experiencing deflation. This is a positive development and the risk that deflation becomes ingrained and so starts to have adverse effects remains very low. Indeed, deflation may last only one month. …
The recent sharp rise in government bond yields, most pronounced at the long end, has fuelled concerns about its potential adverse impact on the economy. After all, since it has not been accompanied by an increase in equity prices or a fall in corporate …
15th May 2015
Tuesday’s inflation figures look set to show that the UK slipped into deflation in April. But this is likely to have largely reflected the timing of Easter this year compared to last. Since the oil price has rebounded and wage growth is building, a …
May’s Bank of England Inflation Report supports financial markets’ (and our own) view that the Monetary Policy Committee (MPC) is in no rush to raise interest rates. However, we do not think that the Committee’s increased pessimism about the UK’s supply …
13th May 2015
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 …
March’s industrial production figures were a tentatively encouraging sign that a recovery in the sector is resuming after several months of stagnation. … Industrial Production …
12th May 2015
We doubt that the weakness in the latest BRC Retail sales figures offers much cause for concern. Indeed, with real wages rising robustly, employment strong and consumer confidence at a 12-year high, the prospects for spending are bright. … BRC Retail …
Since the first estimate of Q1 GDP has cast some doubt over the recovery’s health, the MPC is likely to have voted unanimously again at this month’s meeting to keep interest rates on hold. And while we think that the recovery is secure, the tough fiscal …
11th May 2015
The Tories’ outright majority indicates that the economy is clearly heading for a major re-intensification of the fiscal squeeze next year. This will represent only the first step towards their ambitious plans to eliminate the overall deficit – which …
8th May 2015
With the Conservatives achieving an overall majority in the general election, we now know that consumers are set to face another five years of harsh austerity. But on the whole, households look better placed to deal with it than they did at the start of …
Although all eyes this morning have been on the general election result, March’s trade figures have also been released and help to explain some of the slowdown in GDP growth in the first quarter. … Trade …
With the Conservatives on course to achieve an overall majority, the UK general election result is a surprisingly market-friendly outcome and removes the risk that the economy suffers a prolonged period of political uncertainty. Meanwhile, the gilt market …
The recent softness of retail sales suggests that consumers are saving their windfall from lower energy prices. However, there are still good reasons to think that the money will end up being spent. … Why aren’t consumers spending their extra …
7th May 2015
Although gilt yields have risen over the last few weeks, this seems to have reflected easing fears of deflation, not growing concerns about the outcome of the general election. So with little political risk priced in, gilt yields look vulnerable to rise …
Although GDP posted its smallest quarterly rise since 2012 in the first quarter of this year, we doubt that the economy is on the cusp of a renewed slowdown. The business surveys suggest that Q1’s 0.3% rise will be revised up and/or that quarterly growth …
6th May 2015
Our Election Preview , published 30th April, contains our detailed analysis on the election. Here we answer questions clients may have about the possible series of events over the coming days and weeks. … Post-election negotiations unlikely to redraw …
April’s Markit/CIPS report on services should allay fears of a renewed slowdown in the economy following the deterioration in the manufacturing and construction surveys already released. That said, the recovery is clearly not very well balanced across …
We doubt that the Monetary Policy Committee would want to change monetary policy so close to a general election, especially when a new government might not even have been formed by the time of this month’s meeting. But the election aside, there is still …
5th May 2015
With a hung parliament appearing overwhelming likely, Thursday’s general election looks set to be followed by days, if not weeks, of political horse-trading, and whatever government is finally formed is likely to be less stable than the last. Nonetheless, …
1st May 2015
March’s household borrowing figures showed that consumers’ appetite for credit is increasing. But strong rises in real incomes this year should ensure that a pick-up in credit growth is sustainable. … Household Borrowing Monitor …
The combination of the deterioration of the Markit/CIPS report on manufacturing but improvement in the lending figures highlighted that the economic recovery has become increasingly dependent on consumers. … Markit/CIPS Report on Manuf. (Apr.) & Money …
The economic outlook will not turn on a sixpence after the election. Granted, the election may mark only the start of a period of political uncertainty and, on paper, the differences between Labour’s and the Tories’ fiscal plans are the biggest for a …
30th April 2015
The latest consumer confidence figures provided another reason to think that Q1’s slowdown in economic growth will prove short lived. Indeed, with real incomes growing strongly, we expect household spending to pick up pace later this year. … GfK/NOP …
According to the latest CBI Distributive Trades Survey, weak food sales pulled down overall retail sales growth in April. However, high levels of consumer confidence, strong jobs growth and rising real incomes point to retail sales performing well over …
29th April 2015
With the general election just days away, the news that the economic recovery slowed sharply in the first quarter clearly won’t help the coalition parties. However, we expect the slowdown to be only temporary. … Preliminary estimate of GDP …
28th April 2015
The latest CBI Industrial Trends Survey provided some reasons to be optimistic that the sector’s poor performance in the first quarter does not herald the beginning of a prolonged period of weakness. … CBI Industrial Trends Survey (Apr. & …
27th April 2015
Although all eyes are on the general election due to take place in less than a fortnight, developments across the Channel have the potential to be just as important an influence on the UK economy in the coming weeks. Fortunately, the UK is better placed …
24th April 2015
GDP growth has been weak during the term of several governments which had only small majorities. But we would not conclude from this that the fragile government that this general election may yield will condemn the economy to a period of sub-par growth. …
With two weeks until May’s general election, the polls still show that no party is likely to win an overall majority and the composition of the next government is unclear. Despite this ongoing uncertainty, consumer confidence has remained buoyant. This …
23rd April 2015
The last public finances figures before the general election brought some good news for the incumbent coalition. However, weak retail sales figures for March increase the chances that next Tuesday’s preliminary Q1 GDP figure shows a slowdown in economic …
The deal which looks likely to be sewn up at this week’s EU Council meeting should pave the way for David Cameron to announce a date for the EU referendum soon and officially launch his campaign to remain in a “reformed EU”. However, we doubt the deal …
22nd April 2015
The minutes of April’s MPC meeting showed that the Committee has become slightly less concerned by the downside risks to the inflation outlook. But with inflation set to hover near zero for another six months, Bank Rate still look unlikely to rise this …
Recent UK general elections have barely affected markets and this one has yet to have a material impact too. Nonetheless, we could still see a big movement in asset prices in this election’s wake. … Election set to have bigger market impact than …
21st April 2015
The fiscal rules proposed by the Conservative and Labour parties in their manifestos last week suggested that the latter could borrow an extra £130bn more than the Tories over the next five years if in power. Using the pre-financial crisis rule of thumb …
17th April 2015
The UK’s employment miracle shows no signs of drawing to a close. And with some slack still left in the labour market and pay growth not yet threatening the 2% inflation target, the MPC remains under little pressure to cool the economy. … Labour market …
Economists and policymakers are significantly overestimating the permanent damage inflicted to the economy from the financial crisis and recession. We still think that the economy has the potential to grow strongly over the next few years without …
16th April 2015
The political parties’ manifestos have confirmed that the scale of the fiscal squeeze could be very different depending on which of them is in power. But there are various factors that will probably mean that the squeezes that the parties would end up …
15th April 2015
UK inflation held at zero in March, but it could yet dip into negative territory at some point in the coming months. But regardless of whether inflation turns negative or not, the big picture is that a period of low inflation should help the economic …
14th April 2015
