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September’s rise in retail sales volumes puts the consumer recovery back on track. While pressure on real earnings points to further growth being unspectacular, rising wealth and the boost to consumer sentiment from good news about the economy means that …
17th October 2013
The claimant count measure of unemployment has been falling more sharply than the wider ILO measure used by the MPC in its forward guidance on interest rates. While the claimant count is a timelier measure, we do not think that it necessarily heralds an …
16th October 2013
The latest labour market figures supported the MPC’s (and our own) view that even a fairly robust economic recovery will bring unemployment down only slowly. … Labour Market Data …
While a touch disappointing, September's inflation figures were not a material blow to hopes that it will fall back to its target. And we still doubt that the inflation knockouts that underpin the MPC's forward guidance are at risk of being breached. … …
15th October 2013
The Government's Help to Buy (HTB) Scheme has been criticised for stoking a potential house price bubble and exposing the taxpayer to unwarranted risks. A more overlooked danger arises from the impediment HTB may present to a recovery in business …
We think that this Wednesday’s labour market figures will show that the unemployment rate held steady in August, which could prompt markets to push back further their expected timing of the first rise in Bank Rate. Even if the unemployment rate does edge …
14th October 2013
Last week’s lacklustre official figures for trade, industrial production and construction output in August cast more doubt on whether the recovery is likely to be quite as robust and as broad-based as many of the activity surveys have indicated. …
With interest rate expectations dropping back a bit over the last month and the recovery continuing apace, today’s decision by the Monetary Policy Committee (MPC) to leave policy unchanged was predictable. And, barring unexpected shocks, a dearth of …
10th October 2013
Next week’s inflation figures look set to confirm that retailers will be burdened with another fairly hefty rise in business rates in April. While pressure is growing on the coalition to support retailers, immediate relief looks unlikely. Nonetheless, …
August’s weak industrial production and trade figures signal that GDP growth in the third quarter might not be quite as strong as the business surveys have suggested. Meanwhile, the latest Credit Conditions Survey indicates that banks are not planning to …
9th October 2013
While September saw the BRC’s measure of retail sales growth slow, that month’s warm weather explains part of the weakness. And other indicators have been more positive. Nonetheless, the consumer recovery continues to rest on fragile foundations. … BRC …
8th October 2013
Following a disappointing initial reaction to forward guidance, there could have been a case for the MPC to do more to support the recovery. But with expectations for the date of a rate rise having receded and the recovery going strong, that seems less …
The recent concerns about the type of economic recovery underway in the UK are overdone. While the recovery still faces some major challenges, we do not believe that an over-reliance on the housing market is one of them. In fact, in this …
7th October 2013
Today we are publishing our latest UK Quarterly Review, in which we are revising up our growth forecasts. Stronger growth should not stop inflation falling back to target. It won’t prevent unemployment from coming down only slowly either. Accordingly, we …
In an attempt to reinforce the Conservatives’ image of fiscal responsibility, Mr Osborne said last week that his party would return the overall public finances to surplus by 2020. This would require an additional £25bn of tightening – equivalent to …
The economic recovery is becoming more entrenched, with GDP confirmed as having grown by 0.7% in Q2 and expansion evident across all three main sectors of the economy. Meanwhile, sentiment has risen to levels not seen since the late 1990s. And although …
3rd October 2013
The CIPS business surveys continue to point to a sharp pick-up in GDP growth in the third quarter. Admittedly, they are the most upbeat of all the economic indicators at the moment. Nonetheless, GDP growth in the third quarter should have comfortably …
Following the Bank of England’s announcement of forward guidance, there have been a number of warnings about the dangers of a further prolonged period of very low interest rates. We think these concerns are overblown. Low rates are needed to aid the …
2nd October 2013
While September’s CIPS manufacturing survey softened slightly, the survey still points to a sector recovering at a rapid clip. However, with export growth weak relative to domestic demand and cost pressures persisting, some concerns remain about the …
1st October 2013
While tomorrow’s rise in the national minimum wage (NMW) is small, proposals to increase it significantly more in the future threaten to add to the pressure on retailers’ profit margins. But even if the proposed reforms go ahead, the overall outlook for …
30th September 2013
While the pick-up in certain measures of broad money is another encouraging sign that the economy has turned a corner, the continued weakness of bank lending could prevent the economic recovery from gathering much more pace in the near term. … Monetary …
Growth in household credit continues to show no sign of breaking away from the subdued rates seen since 2008, with any nascent ‘bubble’ in the housing market not yet apparent in the borrowing data. But with sentiment rising and the second stage of ‘Help …
With last week’s National Accounts showing a steep fall in business investment in Q2 and the current account deficit widening to a record high in the first quarter of this year, hopes for a rebalancing in the economy towards investment and exports are, on …
Consumer confidence in September rose to its highest level since October 2007. With real incomes still falling, it is too early to be sure that this will lead to sustained growth in household spending. But it does provide further hope that spending will …
27th September 2013
Today’s news on the state of households’ finances shows that incomes and saving recovered from the dips seen in Q1. With the financial position of households looking more sustainable, modest growth in consumer spending should continue. … Q2 sees …
26th September 2013
The final estimate of Q2 GDP left the quarterly rise unrevised at a decent 0.7% and timelier economic data suggest that the recovery has gained more momentum since. However, the news that the current account deficit reached a massive 5.5% of GDP at the …
The further strengthening of the CBI Distributive Trades Survey in September provides reassurance that August’s drop in the official measure of retail sales was just a blip. For now, rising consumer confidence and employment seem to be offsetting the …
25th September 2013
Today’s statement by the Bank of England’s Financial Policy Committee (FPC) lacked drama. While the Committee is keeping a close eye on developments in the housing market, the approach for now is words rather than action. In any case, with house prices …
Mark Carney’s forward guidance has been unsuccessful in convincing the markets that the Bank Rate is likely to remain on hold until 2016. Speeches from other MPC members in the last two days, indicating that a range of views exist within the MPC regarding …
24th September 2013
With recent data showing no sign of a pick-up in workers’ pay, the economic recovery looks promising for UK firms’ profits. But it is questionable quite how much this will aid in rebalancing the economy towards investment. … Will a rising profit share …
With UK gilt yields unhelpfully following US Treasury yields up in recent months, it was welcome that they followed them down last week. Admittedly, with the prospect of more QE receding and the recovery still strengthening, a further significant fall in …
23rd September 2013
While the summer’s prolonged hot spell may have distorted sales patterns, the underlying trend in consumer spending still looks quite positive. … Consumer recovery still looking …
20th September 2013
Following a run of disappointing monthly public sector borrowing numbers, August’s public finances data suggested that the economic recovery could be finally starting to make its presence felt in the fiscal numbers. … Public finances …
August’s fall in retail sales volumes may well reflect the impact of the summer’s prolonged warm spell, rather than any underlying weakness in shoppers’ desire to spend. That said, the first monthly fall in sales volumes since April could temper …
19th September 2013
September’s MPC minutes suggest that, despite the arguably disappointing impact of forward guidance, the Committee is happy with its policy stance. A resumption of quantitative easing (QE) before the end of the year now looks less likely, although we …
18th September 2013
Relatively strong growth in the workforce is one factor that should prevent the unemployment rate from falling quickly towards the Bank of England’s 7% threshold. An influx of workers from Romania and Bulgaria should support this growth, allowing interest …
August’s fall in CPI inflation marks another step towards the 2% rate we think it could reach early next year. An end to the squeeze on households’ real earnings remains in sight. … Consumer Prices & Producer Prices (Aug.) & Lloyds …
17th September 2013
Although there are worries that the Government’s housing schemes will push up house prices rather than activity, housebuilding has picked up and we expect it to give further support to the recovery. … Housebuilding should continue to support the …
16th September 2013
Households have done the bulk of the work in repairing their balance sheets, but we don’t think that they are quite there yet. Household debt as a share of income probably has a bit further to fall, which may prevent the consumer recovery from gaining too …
Last week’s numerous stories about estate agents dominating the jobs market were probably a bit over the top. In fact, the rise in both manufacturing and construction employment in the first two quarters of the year strengthened our view that the economic …
The recent slowdown in emerging market (EM) economies begs the question of whether UK exporters have shot themselves in the foot by expanding into these markets in recent years. However, the growth prospects of EMs are still more favourable than those in …
13th September 2013
UK consumers have endured the worst squeeze on their real incomes since the 1920s, but finally the end is in sight. We expect falling inflation, a rebound in productivity and some support from tax cuts to prompt real pay to start rising again next year. …
12th September 2013
The drop in the ILO unemployment rate to 7.7% in the three months to July is consistent with signs of economic recovery and takes the rate closer to the MPC’s 7% threshold. But with scope for a rebound in productivity and evidence that this is happening, …
11th September 2013
By choosing the unemployment rate as its threshold for forward guidance, the MPC has been criticised for using a fairly narrow measure of slack in the labour market. However, we doubt that this will prevent interest rates being kept at 0.5% for much …
10th September 2013
This report is only available as a PDF. Click to download. … But is it the right type of recovery for the Chancellor? …
9th September 2013
Past housing market upswings have all coincided with above-average rates of consumer spending growth. But it is easy to overstate the strength of the direct linkages between the two. Therefore, unless we have under-estimated the likely strength of income …
Concerns are building that the economic recovery is too reliant on an unsustainable boom in the housing market. But we think that this is giving the housing market too much credit for the turnaround in the economy. The current recovery is based on much …
The outlook for retailers’ costs is brighter than it has been for many years. That said, with only a weak recovery in household incomes in prospect and competitive pressures likely to intensify, retailers are likely to have to pass many of these cost …
6th September 2013
One criticism levelled at Robert Shiller’s cyclically-adjusted price/earnings ratio (CAPE) is that – for the S&P 500 at least – the denominator has been depressed by accounting changes. This has led some to conclude that US equities are overvalued. But we …
With Vodafone’s sale of its stake in the US telecoms company Verizon expected to deliver almost £24bn to UK investors, the potential impact has been compared to that of the Bank of England’s quantitative easing programme. But, in practice, any boost to …
5th September 2013
