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Third lockdown far less damaging than the first January’s flash composite PMI is consistent with our view that the third lockdown, like the second, was much less damaging for the economy than the first lockdown in March/April 2020. But it suggests that …
22nd January 2021
Budget deficit should shrink without tax rises December’s jump in borrowing is likely to set the tone for the next few months as the third COVID-19 lockdown keeps many businesses closed and will only increase talk of how to pay for the crisis. But the …
Bad January to follow poor December The tiny rise in retail sales in December shows that it wasn’t a very merry Christmas for retailers. And January’s lockdown means it won’t have been a happy start to the new year either. But at least retailers are more …
The possible sharp fall in the population since the start of the pandemic may explain up to 1.8 percentage points of the underperformance of the UK economy last year relative to its peers and, more worryingly, may present a downside risk to our forecast …
21st January 2021
Inflation to temporarily rise above target later this year The rise in CPI inflation from 0.3% in November to 0.6% in December and in the core rate from 1.1% to 1.4% may represent the first step on a climb towards a peak of about 2.5% by the end of the …
20th January 2021
This week’s news on the economic damage caused by the virus and the efforts to fight it have given us some cause for optimism. By 13 th January, 4.4% of the population had received their first COVID-19 vaccination dose. Admittedly, in order to achieve its …
15th January 2021
Economy builds up some immunity to lockdowns The economy has built up a fair bit of immunity to lockdowns, as November’s second COVID-19 lockdown was much less painful for the economy than the first lockdown in March/April of last year. The same is …
We don’t know exactly how long the third English lockdown, which started on 5 th January, will last. Government ministers have talked about schools being closed until mid- or late-February, but the lockdown legislation MPs voted into law on Wednesday has …
8th January 2021
The Bank of England may not be ready to use negative interest rates until H2 2021. And by then, COVID-19 restrictions might be easing and the economy could be growing rapidly. In any case, if the Bank does loosen policy further, we suspect it will use …
7th January 2021
The third lockdown to contain COVID-19 means that the economy will start the year in recession and the recovery will be delayed again. Even so, by expecting the economy to regain its pre-crisis level in Q2 2022 and to avoid major long-term scarring, we …
5th January 2021
Households in a good position to spend, but small businesses struggling November’s money and credit figures highlighted the divergence between households who continued to pay back credit and invest in property, and small businesses who were once again …
4th January 2021
Today’s news that a UK-EU Brexit deal will soon be announced may not boost the financial markets by much more than it already has. But a decent economic recovery from the COVID-19 crisis in the second half of next year may mean that the pound rises from …
24th December 2020
Second lockdown sends borrowing soaring again November’s surge in borrowing is unlikely to be reversed much over the next few months as the ongoing COVID-19 restrictions keep many businesses closed. This will only increase talk of how to pay for the …
22nd December 2020
High savings rate paves the way for solid rebound in 2021 While a double-dip recession is a clear possibility if the Tier 4 COVID-19 restrictions are extended into 2021, Q3’s high saving rate provides optimism that as long as vaccines are effective and …
The new Tier 4 COVID-19 restrictions, which closely resemble November’s lockdown, raise the chances that the economy stagnates, if not contracts, in the first three months of 2021. If the economy is heading for a double-dip, at least the second leg down …
21st December 2020
The sentiment from this passage we published in the first UK Economics Weekly of this year still feels relevant for 2021: “With something like a no deal still possible in December, Brexit uncertainty will prevent 2020 being a good vintage for the …
18th December 2020
Second lockdown has much smaller impact than the first The relatively small drop in retail sales in November indicates that the second COVID-19 lockdown didn’t change households spending behaviour by anywhere near as much as the first. And it suggests …
The positive news on vaccines meant that the Monetary Policy Committee (MPC) didn’t feel the need to loosen policy any further at its December meeting today. And, as long as there is a Brexit deal by 31 st December 2020, we don’t think it will need to …
17th December 2020
The recent swings in sterling triggered by shifts in sentiment towards the chances of a Brexit deal have left little room for the pound to appreciate if there’s a deal, but plenty of room for it to depreciate if there’s a no deal. As the markets appear to …
16th December 2020
PMIs understating both the fall in GDP and the rebound The small rebound in the composite PMI in December suggests that GDP did not make much of a recovery after the hit to activity from the COVID-19 lockdown in November. But it is probably understating …
Low inflation won’t prompt the MPC to act The sharp fall in inflation from 0.7% in October to 0.3% in November (consensus 0.6%) and in the core rate from 1.5% to 1.1% came as a bit of a surprise. However, some of these moves were driven by one-off …
In contrast to the consensus, we think that the economic recovery in 2021 will be quicker and fuller, the Bank of England will continue to shy away from negative interest rates, the Chancellor won’t tighten fiscal policy and if there’s a no deal Brexit, …
15th December 2020
Steady drip-feed of weaker news The smaller-than-expected fall in employment in October shows that the government’s furlough scheme has minimised the labour market damage from COVID-19 so far and provides encouragement that there will be a steady trickle, …
It’s been over four years since the EU referendum and the world is a clearly a very different place. However, when it comes to Brexit, it feels like Groundhog Day. The EU Summit on 10 th /11 th December, billed as the moment when a Brexit deal could be …
11th December 2020
Vaccines mean the recovery may not need a further monetary boost But monetary policy will remain extremely loose for years yet And a no deal Brexit could yet prompt further easing The next Monetary Policy Committee (MPC) meeting on Thursday 17 th December …
10th December 2020
GDP barely grew at all in October, but hope further ahead The economy continued to grow in October, but at a snail’s pace. And with the COVID-19 restrictions likely to remain in place for some time, the economy is in for a difficult few months yet. But …
Brexit is going to get a lot of airtime over the next few hours, days and weeks, especially once the outcome of the call between Boris Johnson and Ursula von der Leyen later this afternoon is made public. But most of the coverage about a deal or no deal …
7th December 2020
Depending on which paper you have read this week a Brexit deal is either all-but done, with just some technical details to iron out, or the negotiations are about to collapse due to demands from the EU and intransigence by the UK. We admit that we don’t …
4th December 2020
COVID-19 vaccines have dramatically brightened the economic outlook. GDP probably still fell during the second lockdown in November, perhaps by up to 8% m/m, and the strict COVID-19 regional tier system will limit the rebound in activity in the coming …
3rd December 2020
