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After a worrying start to the year, the economic news this week has been a little better. This supports our view that while Brexit uncertainty is hampering growth, the economy is fundamentally sound. There has been limited reaction in financial markets to …
22nd February 2019
The last set of public finances figures released before the Spring Statement put the government on track to undershoot the OBR’s borrowing forecast of £25.5bn in the 2018-19 financial year. That gives the Chancellor even more room to support the economy …
21st February 2019
While reassuring, the large rise in employment in Q4 probably marks a peak in employment growth given the deterioration in surveys of hiring in January. And pay growth plateaued. Nonetheless, we think the Monetary Policy Committee (MPC) might raise …
19th February 2019
As demand and supply would both drop after a no deal Brexit, it’s not obvious how policy should respond. But our view that the drop in demand would last longer than any fall in supply suggests the focus should be on stimulating demand. And even in the …
18th February 2019
It has been a worrying week for the economy. The Q4 GDP figures bore out the story that the global economic slowdown and Brexit worries are weighing on growth. And it increasingly looks like Brexit will go down to the wire. If there is a silver lining, it …
15th February 2019
Despite growing concerns about Brexit, which seem to be weighing on other sectors of the economy, the rise in retail sales volumes in January implies that consumers are still willing to spend. Of course, unless a Brexit deal is signed soon, sales could …
The real Brexit showdown was always expected to take place on 27th February, but if anything this afternoon’s votes in Parliament will add to the current downward pressure on the pound as they have reduced the chances of a deal a bit and raised the …
14th February 2019
Until recently the labour market had seemed to be immune to the Brexit uncertainty which has hampered other sectors of the economy, but there are signs that Brexit is now starting to affect the labour market as well. Slower employment growth presents …
13th February 2019
The fall in CPI inflation in January to below the Bank of England’s 2% target for the first time in two years provided a further boost to households’ real spending power, but we doubt inflation will fall any further. … Consumer Prices & Producer Prices …
Should a Brexit deal be reached within the next few months, the UK’s financial markets will probably buck the global trend with money market rates, Gilt yields and the pound all rising by more than is widely expected. The FTSE 100, however, probably won’t …
12th February 2019
If there’s a silver lining from the mounting signs that the uncertainty caused by Brexit is holding back GDP growth, it’s that the economy could enjoy a decent rebound if a Brexit deal is agreed. … GDP First Estimate (Q4 …
11th February 2019
The Bank of England drove a bulldozer through its near-term projections this week as it ratcheted up the severity of Brexit uncertainty and the corresponding impact on the economy in its forecast. We have some sympathy with the Bank’s change of heart. The …
8th February 2019
The Bank of England today emulated the Fed by leaving interest rates on hold, sounding more dovish and hinting that fewer rate hikes are in the pipeline. But if we are right in thinking that GDP growth will be stronger than the Bank believes, then it may …
7th February 2019
It’s possible that the falls in the activity PMIs in January are overstating the extent of the Brexit-related weakening in actual GDP growth. However, the fact that the UK PMIs haven’t fallen further than the PMIs in other major economies suggests that …
6th February 2019
The headline index of the Markit/CIPS services survey in January suggests that the slowdown which began in Q4 worsened at the start of Q1. And worries about future demand now appear to be seeping into hiring decisions, which may start to weigh on …
5th February 2019
Parliament hit the Brexit ball back into May’s court this week, leaving us with no clearer picture of how Brexit might unfold than we had this time last week. But beneath the bouncing Brexit headlines, the economy seems to be holding up well … Parliament …
1st February 2019
The developing global slowdown has caused the UK manufacturing sector to weaken despite evidence that activity is being supported by some stockbuilding ahead of Brexit. The upshot is that there is little chance of an immediate bounce back from the recent …
While it is guaranteed that the Monetary Policy Committee will leave interest rates at 0.75% at the policy meeting on Thursday 7th February, the accompanying Inflation Report may provide some crucial clues to how keen the MPC is to change rates once …
31st January 2019
While GfK/NOP consumer confidence held steady in January, it did so at a five-year low of -14, and the bigger picture is that consumers remain downbeat despite a fairly healthy economic backdrop. That seems to reflect worries over Brexit. So while …
The uncertainty around Brexit may have weighed on household borrowing in December. But stronger finances should allow households to continue to spend even if borrowing remains subdued. … Household Borrowing Monitor …
30th January 2019
Support for Brady’s Brexit amendment in the House of Commons this evening is good result for Theresa May but is arguably not the best news for the near-term outlook for the economy and the pound as it probably increases the chances of a no deal. This …
29th January 2019
In this Focus , we consider how sterling, Gilts and UK equities will be affected by the outcome of negotiations over Brexit and the global economic slowdown that we are anticipating. Our judgement is that the UK’s currency and 10-year government bond …
With 60 days to go and no deal agreed, it looks increasingly likely that Brexit will be delayed beyond 29th March. This Update answers seven questions on how Brexit could be delayed by extending the “Article 50” negotiation period and what that would mean …
28th January 2019
While the vote in Parliament next Tuesday might not break the Brexit deadlock, it could give us a better steer on where the UK is headed. After all, MPs will vote on a series of amendments which could take a no deal Brexit off the table. Given that this …
25th January 2019
The slump in retail sales volumes in December is not too worrying given that it seems to have largely reflected consumers bringing forward Christmas purchases in order to take advantage of ‘Black Friday’ discounts. After all, sales rose sharply in …
24th January 2019
The labour market figures for November were reassuring as they showed no sign of any hit to firms’ hiring from Brexit. And with pay growth also strong, households remain well placed to increase spending if and when the Brexit handbrake is released. … …
22nd January 2019
The Prime Minister’s “Plan B” is remarkably similar to Plan A, which Parliament rejected less than a week ago, so it doesn’t appear to change the near-term outlook for the economy. In that regard, votes on amendments to Plan B on Tuesday 29th will …
21st January 2019
With Prime Minister Theresa May now holding cross-party talks, the chances have risen of a “soft” Brexit, resulting in the UK retaining closer ties with the EU than her defeated deal would have involved. A new set of negotiations would prolong the Brexit …
18th January 2019
UK politics remains in meltdown. And there are plenty of signs that this is weighing on sentiment. But beneath this, the economy is well placed to benefit if and when the Brexit uncertainty lifts. … Sentiment, not fundamentals, weighing on …
December’s slump means that retail sales volumes fell in Q4 as a whole. Unless a Brexit deal is signed soon, there is unlikely to be much of a rebound in Q1 2019 either. That said, if a no deal Brexit is avoided, consumers should be in a good position to …
The overwhelming defeat of the Brexit deal in Parliament last night increases the chances of the economy performing along the lines of our “fudge and delay” scenario, in which GDP growth rebounds in the second half of 2019 and into 2020. That said, in …
16th January 2019
Whatever the Bank of England thinks about yesterday’s failed Brexit vote, it will surely be pretty content with the news this morning that inflation has fallen to within a whisker of its 2% target for the first time since January 2017. Unlike Parliament, …
The resounding defeat of May’s Brexit deal in Parliament by a huge 230 votes this evening is a very bad result for the Prime Minister but could prove to be a good result for the near-term outlook for the economy and the pound. … Meaningful Vote on May’s …
15th January 2019
Either a narrow or a heavy defeat in Parliament’s meaningful vote on Theresa May’s Brexit deal tonight would probably prompt the pound to rise. An inconclusive moderate defeat would arguably be the worst result for the pound, as it would prolong …
In this Update we set out what might happen with Brexit over the coming days and months. We have already illustrated how the various Brexit outcomes would influence the economy and financial markets. Here we address the political and procedural questions …
14th January 2019
The most likely Brexit outcome, for now at least, appears to be a delay of a few months beyond March. While this means that we will have to wait a little longer for the Brexit handbrake on the economy to be released, we are still more optimistic than most …
11th January 2019
The easing in GDP growth in the three months to November leaves growth only a little below the rates seen before the temporary factors of the World Cup and the unusually hot weather boosted it in the summer. Presumably growth will slow further in Q1 as …
In spite of the recovery that has taken hold since the turn of the year, we think that equities have further to fall. It is well known that UK stock indices are heavily weighted towards energy companies. As a result, given the violent slide in the oil …
10th January 2019
Given the huge and growing uncertainty surrounding Brexit, we are now placing much more emphasis on three forecasts for the economy that are based on different Brexit outcomes. The key point, though, is that in each scenario we are a bit more optimistic …
It looks as though the festive period was fairly underwhelming for the retail sector. But Christmas sales don’t tend to set the tone for the next year, and we think the weakness is mainly due to Brexit uncertainty. As such, once (if) a deal is agreed, …
8th January 2019
It’s well known that the uncertainty caused by the Brexit bedlam probably contributed to GDP growth easing from 0.6% q/q in Q3 of last year to 0.3% or less in Q4. But it’s less appreciated that should a way out of the Brexit quagmire be found in the next …
7th January 2019
Much like a drone over an airport runway, Brexit is preventing the UK economy from taking off in 2019. But the foundations are in place for growth to fly once (if) Brexit lands. … Slow growth, Christmas spending & …
4th January 2019
The uncertainty hanging over the economy prevented households from committing to much unsecured or mortgage borrowing in November. But at least there is still little sign that they have decided to boost savings sharply, which would have a big adverse …
Despite the small rise in the headline index of the Markit/CIPS services survey in December, it is quite clear that economic growth slowed in Q4. But we think this survey is once again overstating the extent of the easing. What’s more, if (and it is a big …
Despite the headline manufacturing PMI hitting a six-month high in December, the sector probably stagnated at the end of 2018. There were some signs, though, that worries of an impending no deal Brexit will provide a short-term boost to manufacturing …
2nd January 2019
Clearly what form Brexit takes (if it takes place at all!) will be the key influence on the economy next year, but our sense is that there is a bit more upside to GDP growth and the pound than widely believed. The UK may even outperform the rest of the …
21st December 2018
Brexit concerns may weigh more heavily on consumer spending over the next few quarters. But a further improvement in real earnings growth should put households’ finances on a more sustainable footing, as long as a Brexit deal is agreed. … Brexit concerns …
The economy isn’t as healthy as the unrevised 0.6% q/q rise in GDP in the third quarter suggests, but providing that a Brexit deal is reached, we think GDP growth will surprise on the upside next year. That should give a welcome boost to the public …
December’s further fall GfK/NOP consumer confidence adds to the evidence that Brexit uncertainty is weighing on consumers’ willingness to spend. However, given the strength of the labour market, and the recent rise in real wage growth, household spending …
A boost to retail sales in November from Black Friday saw sales record their largest monthly increase since May. Nonetheless, as this followed two consecutive monthly falls, the retail sector will end the year with a whimper. In fact, despite a strong …
20th December 2018
