Filtered by Subscriptions: UK Markets Use setting UK Markets
While the success of the UK’s job furlough scheme has prevented the unemployment rate from rising as far as it has in the US, an increase in UK unemployment has been delayed rather than avoided altogether. This is a key reason why we expect an impressive …
20th August 2020
The sudden imposition of quarantine on people arriving from France highlights the risks involved in foreign travel while the virus is still circulating. This uncertainty is likely to mean it takes a very long time for international travel to recover from …
19th August 2020
Inflation still set to fall close to zero, despite July jump The sharp rise in CPI inflation from +0.6% to +1.0% came as a bit of a surprise, but it is unlikely to mark the start of an upward trend. CPI inflation still looks on track to fall to within a …
The overwhelming bulk of the pain from the huge 20.4% q/q fall in real GDP in Q2 (which hides the bigger peak to trough fall of 25.6% between February and April) has so far been borne by the government and businesses rather than by households. But that is …
14th August 2020
UK assets may outperform overseas assets over the next year or two even though the UK’s economic recovery from the coronavirus crisis may take longer. We think that a larger expansion in the Bank of England’s quantitative easing (QE) programme than the …
13th August 2020
GDP recovering, but it will feel like a recession for a long time The rises in GDP in May and June mean that in some ways the largest recession on record is already over. But as the full scale of the fallout in unemployment has yet to be felt and as GDP …
12th August 2020
The success of the Eat Out to Help Out (EOHO) scheme suggests that fears about the virus are not preventing activity. But as meals out only seem to be popular due to a heavy discount, consumers are still behaving cautiously. This restraint is part of the …
11th August 2020
The lull before the storm The cracks evident in the latest batch of labour market data are likely to soon turn into a chasm with the unemployment rate rising from 3.9% to around 7.0% by mid-2021. The 220,000 q/q (0.7%) fall in employment in Q2 (consensus …
By July, we think that around 4 million people had already left the government’s job furlough scheme and 5 million remained on the scheme. That fall is faster than we had expected but does not change our forecast that the ILO unemployment rate will reach …
10th August 2020
We don’t think that the recent resurgence in the coronavirus in certain parts of the UK makes the economic outlook any weaker than we already thought. But more widespread outbreaks would either slow the pace of the economic recovery, stall it, or send it …
7th August 2020
Interest rates lower for longer The Monetary Policy Committee (MPC) could have saved itself some time and just read our UK Economics Focus , published on 4 th June, or our UK Economics Update , published 14 th May, both of which came to much the same …
The Monetary Policy Committee (MPC) left its interest rate and quantitative easing (QE) policies unchanged today and its new projections appear to suggest that no further loosening is required. But its dovish language is more important for the future path …
6th August 2020
The large share of consumer-facing services in the UK economy, combined with a deeper and longer lockdown than most other developed economies meant that the UK was always going to be hit harder than some other countries. But the larger fall in GDP in the …
5th August 2020
Easing the economy off life support As we enter August, we come to the first of many crunch points in the economy’s recovery from the coronavirus. (See here .) The labour market has been in suspended animation with the government’s furlough scheme …
31st July 2020
Further signs the recovery continued in July The jump in the UK Economic Sentiment Indicator (ESI) in July is an encouraging sign that the recovery continued at a decent pace at the start of Q3. Even so, rising unemployment is likely to put a brake on the …
30th July 2020
The MPC is unlikely to expand QE before November But it may signal that further stimulus will be needed at some point It could revise down the effective lower bound, leaving the door open to negative rates We expect the Monetary Policy Committee (MPC) to …
Easing in the rush for cash The signs that firms did not rush quite as fast to take on more debt in June and that households started to borrow again rather than pay down debt suggest that the economy is moving back towards normal. But as the road to …
29th July 2020
A surge in new domestic coronavirus cases is the biggest downside risk to our forecast that it will take two years for the economy to return to its pre-crisis peak. It could mean that the recovery takes even longer. And if it coincided with the winter flu …
28th July 2020
A new type of recession requires new tools to measure it. It has become clear that the activity PMIs will be of little use in gauging the extent and pace of the recovery from the coronavirus crisis. Our new “Capital Economics BICS Indicator”, which is …
27th July 2020
An anniversary present for the PM? This morning’s retail sales and PMI releases, which appeared to suggest that the economy is quickly recouping the output lost during the coronavirus lockdown and is getting back to normal quicker than the euro-zone, were …
24th July 2020
The economy is on life support, but this can’t last forever. This Update highlights the key dates to watch as the policy support is phased out, in particular the end of the furlough scheme on 31 st October and the winding up of a cluster of other measures …
Encouraging, but economy still well below pre-crisis levels The surge in the composite PMI to 57.1 in July is an encouraging sign of further recovery, but it is not an indication that GDP has recovered to its pre-virus level. We don’t expect that to …
Retail spending back to pre-pandemic levels Retail sales rose back to pre-pandemic levels in June. But since the sector has benefitted disproportionately from online spending and a switch away from other types of spending, this overstates the extent of …
The coronavirus crisis is a new type of recession, but all the normal reasons why business investment recovers slowly from downturns still apply and the uncertainty about Brexit is an additional drag. The upshot is that business investment will lag behind …
23rd July 2020
Despite the Bank of England having slowed the pace of its gilt purchases to below that of gilt issuance (see Chart 1), our forecasts that it will expand the size of its quantitative easing programme by a further £250bn and won’t raise Bank Rate above …
22nd July 2020
Cash outflow starts to ease The smaller rise in public sector borrowing in June compared to May suggests that government support is starting to wind down as the economy reopens. However, government borrowing is still exceptionally high and we suspect that …
21st July 2020
Not so “V” After the temporary respite brought by May’s strong retail sales figures, this week marked a return to the generally gloomy news on the pace of the recovery. Activity struggled to recover meaningfully in most sectors of the economy in May, with …
17th July 2020
Reassuring despite largest fall in employment since 2011 The smaller-than-expected fall in employment in May and evidence that the first wave of joblessness in the coronavirus crisis ended in June shows that the furlough scheme has been effective in …
16th July 2020
A dip into deflation lies ahead The small rise in CPI inflation from +0.5% in May to +0.6% in June probably won’t be sustained for long as the effects of the Chancellor’s VAT cut for the hospitality/tourism sectors and the “Eat Out to Help Out” restaurant …
15th July 2020
The Office for Budget Responsibility (OBR) today sent a clear message to the government that regardless of the speed of the recovery, the government debt to GDP ratio is on an unsustainable path. Even so, we suspect that soaring debt levels will be …
14th July 2020
Not so “V” after all The 1.8% m/m rise in GDP in May is a disappointing first step on the road to recovery and suggests that hopes of a rapid rebound from the lockdown are wide of the mark. Indeed, the path to full economic recovery will probably be much …
One consequence of the new policies announced by the Chancellor last week is that the UK will soon enter a period of deflation. But this will be the good form of deflation, which is temporary, boosts real incomes and incentivises people to spend, rather …
13th July 2020
Spend, spend, spend…and spend Not that long ago a £30bn (1.4% of 2019 GDP) package of tax cuts and extra government spending would have been lauded as fiscal largesse. But coming on top of the £160bn (7.2% of GDP) already spent since the start of the …
10th July 2020
A surge in the money supply has piqued fears of a leap in inflation. But in our view, there is little chance that this expansion of the money supply, driven almost entirely by quantitative easing, will lead to inflation because demand is very weak. There …
9th July 2020
The £30bn (1.4% of GDP) of extra measures announced today by the Chancellor may go some way to speeding up the economic recovery from the coronavirus crisis and limiting the long-term hit to unemployment. But we still doubt that GDP will return to its …
8th July 2020
Some indicators suggest the UK is lagging behind other countries in the race to recover from the coronavirus, and it faces some additional hurdles which could slow it down even more. That’s why we expect UK authorities to keep fiscal and monetary policy …
7th July 2020
Economy rebounding but worse to come for the labour market While the PMIs are tricky to interpret at the moment, the recovery in the all-sector PMI from a trough of 13.4 in April to just shy of 50 in June is another sign that there has been a strong …
6th July 2020
Divisions on the MPC The evidence continued to pile up this week that the economy is rebounding more quickly than we had previously expected. Footfall on UK high streets has risen sharply. On 1st June it was 75% below pre-crisis, but by the end of the …
3rd July 2020
Given the success of the government’s job furlough scheme and the signs of a strong initial rebound in economic activity we now think that the unemployment rate will peak later, in June 2021 rather than in July 2020, and at a lower rate of 7%, …
2nd July 2020
Drop in Q1 GDP a taste of things to come The 2.2% q/q drop in GDP in Q1 2020 was the joint largest fall since 1979 and sets the stage for an unprecedented 15-20% fall in Q2, despite evidence that the economy rebounded in May and June. The National …
30th June 2020
With further fiscal support likely to be unveiled at some point in the next few weeks, the government appears willing to sustain the fiscal stimulus into the years ahead rather than lurch towards austerity as it did after the Global Financial Crisis. This …
29th June 2020
SMEs don’t hesitate to take advantage of bounce back loans The Bounce Back Loan Scheme (BBLS) restored access to credit for small and medium-sized enterprises (SMEs) in May. That increases the chances of a swift recovery but will also raise the fiscal …
Output recovering but employment intentions wavering The rise in the UK Economic Sentiment Indicator (ESI) in June suggests that the economy is continuing to recover after its nadir in April. But firms and households are becoming more downbeat on the …
While we were correct in forecasting a peak-to-trough fall in GDP of 25% (see here ) , recent data suggest that the rebound in economic activity began sooner and has been a bit stronger than we had previously anticipated. By May, the retail sector had …
26th June 2020
Market conditions have generally improved in recent months, with government bond yields remaining low, corporate bond spreads almost back to their pre-coronavirus levels and the FTSE 100 recovering almost half of its 33% slump in February and March. (See …
25th June 2020
Activity on the climb but still well below normal The nature of the PMIs makes them tricky to interpret at the moment, but the rise in the composite PMI from 30.0 in May to 47.6 in June (consensus 41.0) suggests that the additional easing in the lockdown …
23rd June 2020
If the behaviour of Samuel Pepys after the Great Plague of 1665/66 is anything to go by, then people will be willing to return to offices, shops, pubs and theatres surprisingly quickly once the coronavirus crisis subsides. So as long as the virus is …
22nd June 2020
On the road to recovery The sharper-than-expected rebound in retail sales in May shows that the economy has turned the corner and embarked on the recovery leg at pace. (See here .) The quicker reopening of the economy suggests that GDP might contract by …
19th June 2020
Online sales and DIY stores drive the recovery The bigger-than-expected rebound in retail sales in May, was driven by another big step up in online sales and the reopening of DIY stores, and is a sign that the economy started to get back to its feet. But …
Borrowing peaked but will remain high for years The double whammy of the precipitous fall in economic activity and the government’s measures to combat the crisis has already pushed the debt to GDP ratio above 100% for the first time in over 50 years. …
