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Households in a good position to start spending once restrictions lifted October’s money and credit data showed that the mini-boom in the housing market continued, but a fall in consumer credit suggests that consumer spending was already faltering before …
30th November 2020
Following the news on 9 th November that the Pfizer and BioNTech COVID-19 vaccine is very effective, we highlighted how this could dramatically improve the economic outlook. (See here .) Since then, the positive news on other vaccines has convinced us to …
27th November 2020
COVID-19 vaccines are a gamechanger for our economic forecasts and mean that we now think that by the middle of the decade the economy won’t be much smaller than if the COVID-19 crisis had never happened. This is a more positive outlook than the views of …
The Chancellor, Rishi Sunak, was right to say today that now is not the time to tighten fiscal policy. But given the OBR’s downbeat forecasts, the biggest danger is that the government is lured into withdrawing its support too much too soon. That could …
25th November 2020
After having been hit particularly hard during the COVID-19 crisis, UK assets are well placed to perform much better now that COVID-19 vaccines are brightening the economic outlook. Indeed, the combination of a decent economic recovery and continued …
24th November 2020
PMIs suggest economy holding up better than expected in second lockdown The relatively small fall in November’s flash composite PMI suggests that the hit to GDP from the second lockdown will be much smaller than the first and that our expectation of an 8% …
23rd November 2020
In the webinar we hosted this week titled “The UK’s Triple Threat – COVID, Brexit and Debt”, we concluded that the outlook for the economy is brightening. That is unless politicians darken it again with an “uncooperative” no deal Brexit or by tightening …
20th November 2020
Better news on government borrowing won’t last October’s public finances figures were far better than expected. But the likely economic contraction in November and extension of the government’s support measures mean that the better news won’t last. The …
Shift towards online supports sales before lockdown The further rise in retail sales in October means that retail sales are now 6.8% above their pre-virus level. But the current lockdown means that retail sales, and total consumer spending, will probably …
Pockets of pandemic-induced inflation, but outlook subdued The rise in CPI inflation from 0.5% in September to 0.7% in October shows that inflation is well past its crisis low point of 0.2%. But while it will rise more significantly from next April, we …
18th November 2020
Our measures of labour market slack suggest that the official unemployment rate is significantly understating how much spare capacity there is at the moment and will probably continue to do so for a long time. This supports our view that even with a …
16th November 2020
This week’s release of the Q3 GDP data showed that despite a record-breaking 15.5% q/q surge in GDP, the economy was still 9.7% smaller than at the end of 2019. In contrast, the French, Italian and German economies were all about 4% smaller and the US …
13th November 2020
Recovery already over, but hope on the horizon We now know that the record breaking fall in GDP of 19.8% q/q in Q2 was followed by a record breaking rise of 15.5% q/q in Q3. But meagre growth in September shows that the recovery was rapidly running out of …
12th November 2020
The Bank of England won’t be worried by the recent jump in gilt yields given that it has been triggered by the growing possibility of a COVID-19 vaccine improving the economic outlook. As such, we have revised up our gilt yield forecasts. However, as the …
11th November 2020
There have been some concerns that as well as there being little scope to generate stimulus through interest rate cuts, the Bank of England is now reaching its limits on Quantitative Easing (QE). But the Bank seems open to loosening its own QE rules. And …
An effective COVID-19 vaccine would dramatically improve the economic outlook. It may allow GDP to rise to its pre-virus level a year earlier than otherwise and mean that the unemployment rate peaks at 7% next year instead of 9%. But while this would …
10th November 2020
Previous unwinding of furlough scheme hurts employment and worse to come September’s rise in the unemployment rate from 4.5% in August to 4.8% suggests that the previous scaling back of the furlough scheme took its toll. And the unemployment rate may yet …
The UK is facing up to the possibility of a festive period dominated by COVID-19 restrictions and Brexit. We think that the England-wide lockdown will shrink the economy by 8% m/m in November and that the rebound in December will be muted. (See Chart 1.) …
9th November 2020
With a newly imposed lockdown, policymakers putting in place more support and economists rushing around changing their forecasts, you could be forgiven for thinking we had somehow been transported back to March! We are hoping that our new forecasts prove …
6th November 2020
This UK Economics Update contains full details of our new economic and financial market forecasts if there is a Brexit deal and for two different kinds of no deal Brexit. It also highlights that business investment is going to remain in the doldrums for …
5th November 2020
Back in June, we predicted that the Bank of England would expand quantitative easing (QE) by a further £350bn over the following 18 months (consensus £100bn). (See here .) By announcing an extra £150bn of QE today, the Bank has already done £250bn of …
We estimate that the second England-wide lockdown will cause GDP to fall by around 8% m/m in November, prompt the unemployment rate to climb to a peak of 9% next year, contribute to the government borrowing around £420bn (21.7% of GDP) this year and lead …
3rd November 2020
We have been warning since early June that a weak economic recovery and the resulting soft outlook for inflation would prompt the Bank of England to loosen policy by more than was widely anticipated. (See here .) And that for the next 6-12 months, the …
30th October 2020
Mini-housing boom continues but consumers shun other borrowing September’s money and credit data showed that the mini-boom in the housing market continued, but a fall in consumer credit suggests that consumer spending was already faltering before the …
29th October 2020
Consensus comes round to our view that MPC will expand QE by £100bn in November This won’t be the last QE expansion Negative rates are possible, but probably not for another 6-12 months Back in June, we were pretty much alone in forecasting that the MPC …
28th October 2020
Usually employment is determined by the number of workers needed to satisfy demand, so it has a good relationship with GDP. (See Chart 1.) But due to the national furlough scheme, despite GDP (the black line) plunging, employment (the blue line) held up …
23rd October 2020
Heading for a double-dip The fall in October’s Flash activity PMI comes before the full force of the latest COVID-19 restrictions are felt and supports our view that GDP will stagnate, if not contract, in the last three months of the year. If the economy …
Slowing recovery to weigh on spending The further rise in retail sales in September means that retail sales are now 5.5% above their pre-virus level. But total consumer spending will probably start to stutter over the next few months as the furlough …
The growing risk of a second national UK lockdown has spooked equity markets over the last week. We already expect the recovery to stall in Q4 and additional COVID-19 restrictions could easily throw it into reverse, which would hammer UK corporate …
22nd October 2020
