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January’s public finance figures are likely to have brought a smile to the Chancellor’s face insofar as they show that the economic recovery is finally having a positive impact on the public purse. Meanwhile, the recovery in spending on the high street …
20th February 2015
The minutes of February’s MPC meeting showed that the Committee is more divided about the next move in interest rates than the unanimous vote would suggest. The healthy labour market figures released this morning gave some support to those arguing for …
18th February 2015
CPI inflation reached a record low in January and we think that it is more likely than not that inflation turns negative soon. But with few signs that low inflation is becoming ingrained, the UK’s period of deflation should be of the “good” sort. … …
17th February 2015
With CPI inflation on the verge of turning negative, last week’s Inflation Report saw Bank of England Governor Mark Carney discuss his available policy options should deflation show signs of becoming entrenched. However, the fact that a cut in Bank Rate …
13th February 2015
February’s Bank of England Inflation Report confirmed that deflation is now on the horizon, but that it will be fairly short-lived. Indeed, the stronger medium-term inflation forecast was a warning to financial markets that they may have pushed their …
12th February 2015
The marked fall in energy prices over the past six months or so has provided households with a timely boost to their discretionary spending power and so provides another reason to think that the consumer recovery will maintain a robust pace in 2015. … …
11th February 2015
The latest BRC Retail Sales Monitor suggests that consumer spending retained a fair degree of momentum at the start of the year. What’s more low energy prices should ensure that spending remains strong over the course of 2015. … BRC Retail Sales Monitor …
10th February 2015
The latest news suggests that the economic recovery is getting back on track after a slowdown towards the end of last year. Indeed, we remain optimistic about the growth outlook. … Can the economic recovery maintain its …
9th February 2015
Deflation will be the word on everyone’s lips at this week’s Inflation Report press conference. Mr Carney will need to emphasise that the Committee is alert to the risk that deflation becomes ingrained, but is also likely to argue that the period of …
6th February 2015
Whilst December’s trade data are not as bad as they first appear, the strong pound and weak demand from the euro-zone are likely to prevent a material improvement in the external position in 2015. … Trade …
Presumably today’s decision to leave interest rates unchanged was again unanimous after deflation concerns prompted Martin Weale and Ian McCafferty to drop their call for a rate hike last month. An interest rate rise in the immediate future still looks …
5th February 2015
The recent rebound in the oil price does not mean that the UK will necessarily avoid a spell of deflation, although it does increase the chance that the spell is brief and shallow. … Oil price rebound does not eliminate chance of …
With deflation imminent, QE underway in the euro-zone and sterling rising, a case could be made for the MPC to restart its own asset purchase programme. But recent falls in market interest rates mean that the economy is already receiving more monetary …
4th February 2015
While the preliminary estimate of Q4 GDP indicated that the recovery lost pace towards the end of 2014, early 2015 appears to have seen a renewed acceleration. Indeed, monthly indicators of output from the CBI and Markit both picked up in January, while …
CPI inflation looks set to turn negative in the next few months. Whilst we expect the UK’s period of deflation to be short and shallow, there are a number of factors which nonetheless should mean that inflation remains subdued by historical standards in …
3rd February 2015
January’s Markit/CIPS report on manufacturing provided some encouraging signs that the sharp fall in oil prices since last summer is finally beginning to support the sector’s recovery. … Markit/CIPS Report on Manufacturing …
2nd February 2015
We think that the risks to the public finances and output in the oil and gas sector from lower oil prices are exaggerated. And while investment in the North Sea might suffer, stronger investment in other sectors should offset this over the medium term. … …
While last week’s GDP figures confirmed that the recovery lost momentum at the tail end of 2014, we expect it to regain pace soon. One helpful development in that respect should be an end to the mini-downturn in housing market activity that unfolded over …
30th January 2015
December’s money and credit figures brought some tentative signs that lending flows are finally beginning to strengthen and so are providing some timely support to the economic recovery. … Monetary Indicators Monitor …
December’s household borrowing figures provided some tentative signs that we havenow reached a turning point in housing market activity. And, given the strongeconomic backdrop, household borrowing looks set to gather more pace over 2015. … Household …
The strength of January’s GfK /NOP composite index of consumer confidence suggests that consumers’ spirits have been lifted by their stronger purchasing power, partly as a result of the collapse in the oil price. … GfK/NOP Consumer Confidence …
29th January 2015
The chances of interest rates rising soon look even slimmer now that a spell of deflation is on the horizon. However, if we are right in expecting deflation to be brief and of the “good” sort, this does not entirely rule out a rate rise this year. … MPC …
January’s CBI Distributive Trades Survey indicates that consumers are spending the windfall from lower oil prices and higher earnings and suggests that strong retail sales growth over the festive period did not merely reflect a shift in the timing of …
While the preliminary estimate of Q4 GDP brings further evidence that the UK’s economic recovery lost a little pace towards the end of the last year, the recent sharp fall in oil prices suggests that it should regain some vigour in early 2015. … …
27th January 2015
While the UK’s economic recovery has shown some signs of flagging recently, we think its best days may still lie ahead. Admittedly, it has depended on some unsustainable sources and the general election remains a wildcard for the economic outlook. But a …
26th January 2015
The consumer recovery looks set for another robust year of growth in 2015. Indeed, there are a number of factors which could mean that spending growth accelerates. For a start, the halving in the oil price since last summer is beginning to provide a …
23rd January 2015
Anything that kick-starts the UK’s biggest trading partner clearly has the potential to be good news this side of the Channel too. That said, the main channel through which we think QE will work in the euro-zone is by pushing down the euro, which could …
December’s retail sales figures painted a surprisingly upbeat picture of high street spending over the Christmas period. Although we doubt spending growth can remain this strong, the prospects for the consumer recovery in 2015 remain bright. … Retail …
The latest CBI Industrial Trends Survey indicated that weak overseas demand is continuing to keep a lid on the pace of the manufacturing sector’s recovery. … CBI Industrial Trends Survey (Jan. & …
22nd January 2015
December’s public finance figures showed that the pace of deficit reduction remains very slow given the economy’s recent strength and so cast doubt over whether the much bigger planned reductions in borrowing in future years will be achieved. … Public …
The latest labour market figures showed that the recovery in real wages is gathering pace. Despite this, an interest rate rise still looks a way off, with the MPC turning its attention in its recent meeting to the risks of a persistent period of low …
21st January 2015
With E.On’s cut in gas prices probably kicking off a more widespread round of utility price cuts and oil prices falling even further last week, a brief dip into outright deflation now seems more likely than not. However, deflation in the UK will probably …
16th January 2015
We now think that a brief period of mild deflation in the UK is more likely than not. However, this should be the “good” type of deflation which will give a boost to the economy. … A brief period of “good” deflation on its …
14th January 2015
Inflation took another big step down in December and the halving in the oil price since the summer should mean that the UK comes within a whisker of deflation soon. But with the MPC focused on the medium-term outlook for inflation, its present weakness …
13th January 2015
While, on the face of it, the annual drop in the BRC’s measure of like-for-like sales in December is disappointing, there are plenty of reasons to be optimistic about the underlying strength of retail sales. … BRC Retail Sales Monitor …
The halving of the oil price since the summer has already tipped the euro-zone into deflation and looks set to turn the headline inflation rate in the US and Japan negative shortly too. We still think that the UK will just about avoid deflation, although …
9th January 2015
November’s figures on industrial production and trade presented a mixed picture of the health of the UK’s recovery towards the end of 2014. But 2015 should prove to be a better year for UK exporters and manufacturers. … Industrial Production & Trade …
With the recovery showing signs of frailty and the chances of deflation growing, the MPC is under little immediate pressure to raise interest rates. But since lower oil prices should put the spring back into the recovery’s step and underlying price …
8th January 2015
The halving of oil prices over the past six months should provide some timely support to the economic recovery. Indeed, coupled with the freezing of energy bills this winter, lower oil prices should have ensured that CPI inflation eased to just 0.5% last …
6th January 2015
Demand for mortgage lending contracted at the fastest pace since the financial crisis in the final quarter of 2014, but lenders expect a small recovery at the start of this year. By contrast, demand for commercial property loans is at a record high. … …
While the deterioration of the Markit/CIPS services survey in December brought more evidence of a soft end to 2014, we doubt that the economy is on the cusp of a renewed slowdown. Indeed, the recent collapse in the oil price should swiftly reinvigorate …
Heightened uncertainty regarding how weak inflation will be in 2015 and signs that the recovery has become less broad-based are likely to mean that the MPC keeps interest rates on hold at January’s meeting and throughout the first half of 2015. But signs …
5th January 2015
November’s household borrowing figures (released last week) showed that weak housing demand has continued to weigh on mortgage approvals. However, we doubt that this downward trend will persist. Meanwhile, although growth in unsecured lending has …
There is growing evidence that, even before the latest drop in oil prices, the US shale oil revolution had started to weigh on oil producers in Latin America. Oil exports to the US from three of the region’s major oil producers (Venezuela, Mexico and …
Whilst the latest figures on households’ finances painted a fairly discouraging picture of the third quarter of 2014, we are optimistic that rising real wages will ensure that the consumer recovery rests on more sustainable foundations in 2015, ensuring …
23rd December 2014
The latest set of national accounts leave the economic recovery looking more fragile than it appeared before. Nonetheless, there are compelling reasons to be optimistic about the growth outlook. … National Accounts & Balance of Payments …
Last week’s data releases provided more encouragement that the economic recovery has a fair amount of momentum at the end of 2014. Indeed, barring any last-minute shocks, the UK economy appears to have been the fastest growing G7 economy in 2014, with GDP …
19th December 2014
While the strength of December’s CBI Distributive Trades Survey is likely to be exaggerated by the inclusion of “Black Friday” sales, it still provides another encouraging sign on the underlying strength of the consumer recovery. … CBI Distributive …
While the latest public finance figures showed that the trend in borrowing has finally begun to improve, the pace at which the deficit is falling remains disappointingly slow given the strength of the economic recovery. … Public Finances …
