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The Chancellor has frequently claimed that his commitment to fiscal austerity has earned the UK credibility in financial markets and has been the decisive factor behind the fall in gilt yields. But the Chancellor’s fiscal stance has been just one of a …
7th December 2011
October’s official UK industrial production figures were even weaker than we or the consensus had expected and suggested that the risk that the overall economy re-enters recession in the fourth quarter remains high. … Industrial Production …
This month’s fall in the Halifax house price index was hardly a surprise given other recent, downbeat economic news. And with the labour market weakening rapidly and the economy on the brink of recession, the downside risks to house prices have …
6th December 2011
The MPC has sent some strong signals that further quantitative easing (QE) is likely before long. However, the £75bn of asset purchases voted for in October have not been completed yet. And the Committee has indicated that it would prefer to finish them …
5th December 2011
The modest improvement in the UK CIPS/Markit report on services in November does not alter the big picture that the overall economy is verging on recession. … CIPS/Markit Report on Services …
We doubt when he created his fiscal framework that the Chancellor ever imagined quite what a straitjacket he was creating for himself. At a time when he is under pressure to slow down his austerity measures, he has ended up having to beef them up further. …
We have revised down our forecasts for GDP growth and now expect a contraction in 2012 as a whole of 0.5% (our previous forecast was zero growth) and growth of just 0.5% in 2013 (down from 1.5%). The OBR and Bank of England also recently revised down …
2nd December 2011
The Bank of England’s Financial Stability Report (FSR) suggests that a second credit crunch might already be starting to hit the UK. A renewed tightening of credit conditions is just one reason to think that the UK is heading back into recession. … FSR …
1st December 2011
November’s CIPS/Markit report on manufacturing added to the growing mass of evidence suggesting that the UK economy is heading back into recession. … CIPS/Markit Report on Manufacturing …
David Cameron’s decision to pull away from Europe has called into question the UK’s entire future in the European Union. But when it comes to the UK’s near-term growth prospects, the debate over whether or not the Prime Minister was right to exercise his …
30th November 2011
The dominant themes of this Statement come not from the Chancellor but from the OBR. It now paints a pretty gloomy picture of the immediate economic outlook. Even so, we think its forecasts are not gloomy enough. … Autumn Statement …
29th November 2011
The Nationwide house price index remains surprisingly resilient in the face of falling confidence and weak mortgage demand. But with the labour market now deteriorating rapidly, the balance of risks around the house price outlook are heavily skewed to the …
Credit easing marks an important step forward in the Government’s efforts to tackle the lack of bank lending. But it is unlikely to transform the near-term outlook for corporate lending. … Credit easing an important step, but no quick …
28th November 2011
Economic growth in the third quarter was driven by stockbuilding and government spending, neither of which is the basis for a sustained recovery. Indeed, the more forward-looking indicators suggest that the economy has already relapsed and we still think …
24th November 2011
The minutes of November’s MPC meeting supported last week’s dovish Inflation Report in suggesting that a further extension to the quantitative easing (QE) programme is not far off. More QE in February still looks likely. … MPC Minutes …
23rd November 2011
The ailing economy desperately needs more support and yet the Chancellor is more hemmed in than ever by the fiscal position. With no money to spend, Mr Osborne will instead use the Autumn Statement to flesh out his Plan for Growth. But these primarily …
22nd November 2011
October’s public finance figures provided the Chancellor with some relatively good news ahead of next week’s Autumn Statement. But the deterioration in the prospects for economic growth (and hence borrowing) in future years mean that he will have no scope …
With the painful squeeze on real incomes set to continue, consumer spending will fall significantly further. We continue to expect real spending to contract by a further 2% or so by the end of 2012. But an escalation of the euro-zone crisis could lead to …
21st November 2011
The Government was lambasted last week for blaming the UK’s poor economic performance on events in the euro-zone. While the Government might have jumped the gun a bit, it won’t be long before the impact of events across the Channel becomes painfully …
The unprofitable sale of Northern Rock should dent any hopes that the Government will be able to sell profitably its remaining stakes in the other nationalised banks in the near future. … Little cause for cheer on Northern Rock …
17th November 2011
The consumer sector remains in a poor state. We continue to expect real household spending to fall by about 3% over the next two years. … Labour market downturn …
The gap between the cost of Brent crude and the traditional US benchmark, West Texas Intermediate (WTI), is finally closing, but the episode has been another example of how speculative pressures can drive commodity prices well away from levels that can be …
The latest regional activity surveys suggest that the southern regions of the UK have borne the brunt of the economy’s recent weakness. But there are signs that the North’s outperformance will be temporary. … Regional Monitor …
16th November 2011
November’s Bank of England Inflation Report clearly paved the way for a significant further extension of the MPC’s asset purchase programme. … Bank of England Inflation Report …
The latest employment figures showed that the labour market is continuing to deteriorate rapidly. We still think that ILO unemployment will rise above the 3 million mark within the next couple of years. … Labour Market Data …
Fingers crossed, October’s drop in inflation should mean that we have now passed the peak in inflation. The start of 2012 should see inflation begin to fall back sharply and we think that it will be below the 2% target within a year. … Consumer Prices …
15th November 2011
With the euro-zone crisis entering a far more dangerous phase last week, the threats posed to the UK from overseas are looming ever larger. September’s trade data, showing a sharp drop in export volumes to the EU, suggested that the euro-zone crisis has …
14th November 2011
October’s producer prices figures are likely to mark the start of a major downward trend in input price inflation and also underline the competitive pressures bearing down on manufacturers’ pricing power. … Producer Prices …
11th November 2011
Given that the £75bn of asset purchases announced in October has not been completed yet, today’s decision by the MPC to leave policy unchanged was unsurprising. However, the Committee has sent some strong signals that further quantitative easing (QE) is …
10th November 2011
September’s trade figures suggested that the UK is already suffering the adverse effects of the euro-zone crisis. And the worst is yet to come for exporters. … Trade …
9th November 2011
September’s industrial production figures were weaker than the estimates contained in the preliminary estimate of Q3 GDP. The industrial sector seems to be teetering on the brink of recession. … Ind. Production (Sep.) & BRC Retail Sales Monitor …
8th November 2011
After voting to expand its quantitative easing (QE) programme last month, the Monetary Policy Committee (MPC) looks likely to pause for breath at this week’s policy meeting. Nonetheless, with the external environment deteriorating rapidly and inflation …
7th November 2011
The latest rise in house prices in October adds to the evidence that a lack of properties for sale is supporting prices. However, if the recent signs of a fresh downturn in the labour market are extended, that support is likely to weaken over the next few …
At first glance, last week’s activity data painted a mixed picture on the recent health of the UK’s economic recovery. However, a closer inspection suggests that the economy is heading back into recession. … From stagnation to …
An across-the-board deterioration in the economic data over the last month has left the UK economy on course to contract in the fourth quarter. While the first estimate of GDP revealed that output grew by 0.5% q/q in Q3, this largely reflected one-off …
3rd November 2011
October’s CIPS/Markit report on services suggested that the overall economy is likely to contract in the fourth quarter and lent further support to our view that inflation will plummet next year. … CIPS/Markit Report on Services …
The slightly better than expected GDP figures for the third quarter have not altered our view that the UK economy is likely to stagnate at best over the next year or so, with growing risks of another major recession. … GDP Preliminary Est. (Q3) & CIPS …
1st November 2011
The latest rise in the Nationwide measure of house prices is further confirmation that, for now, subdued demand for housing is being offset by a lack of properties for sale. But we suspect that house prices will start to fall again next year. … …
The pronounced weakness of the latest broad money and lending data suggests that the Monetary Policy Committee (MPC) was right to restart QE in October. However, the MPC seems to be getting less ‘bang for its buck’ from QE2 than it did from the first …
31st October 2011
On the face of it, hopes that the UK economy is finally ‘rebalancing’ were given a shot in the arm last week with the release of the Economic Accounts and Balance of Payments figures. However, a closer look suggests that progress has been piecemeal …
The deepening crisis in the euro-zone is likely to have major adverse effects on the UK. We now expect the economy to stagnate in 2012, with a high chance of a technical recession. But a rapid escalation of the euro-zone crisis could prompt a slump to …
28th October 2011
The Balance of Payments and Economic Accounts releases for the second quarter suggested that the economy is a bit better balanced than previously thought. Nonetheless, we doubt that these improvements will be sustained. … Balance of Payments & Economic …
26th October 2011
Last week’s consumer prices data for September may have caused some members of the Monetary Policy Committee to swallow hard after their decision to extend the quantitative easing (QE) programme earlier in the month. But before too long, the combination …
25th October 2011
On the face of it, September’s public finance figures suggested that the chance that the Government will bring borrowing down in line with its fiscal plans has increased. But we doubt that the figures have fully reflected the recent economic slowdown and …
22nd October 2011
September’s rise in retail sales volumes was a rare bright spot in an otherwise terrible set of consumer data released over the last month. Consumer confidence has remained at a very low level, inflation has surged and job losses have gathered pace – all …
21st October 2011
September’s retail sales figures were a bit stronger than we and the consensus had expected, but hardly suggested that a recovery on the high street is now underway. … Retail Sales …
The MPC’s unanimous vote for more QE in October and its growing concerns over the outlook for the economy suggest that further extensions of its bond purchase programme are likely next year. … MPC Minutes …
20th October 2011
September’s unexpectedly sharp rise in headline CPI inflation from 4.5% to 5.2% came as a bit of a nasty surprise. But the key point is that inflation is very close to a peak and should soon start to fall back quite sharply. … Consumer Prices …
19th October 2011
The euro-zone debt crisis is likely to have severe adverse effects on the UK economy at a time when domestic contractionary forces are building. We now expect UK GDP growth to slow from about 0.8% this year to around zero in 2012, with a high chance of a …
18th October 2011
Last week’s data suggested that conditions in the labour market are now deteriorating again at a rapid pace. Rather than being just a blip, we fear that this will mark the beginning of another prolonged rise in unemployment. … Is the labour market now …
