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A surge in sales of household goods due to Black Friday spending helped retail sales to rebound in November. But December might be a little weaker as consumers probably bought some Christmas presents early. … Retail Sales …
20th December 2018
Thanks to the recent sharp drop in oil prices, the fall in inflation in November is likely to be the precursor to a larger fall in December. Inflation could even reach the 2% target, bringing some Christmas cheer both to the Bank of England and seasonal …
19th December 2018
MPs are increasingly pushing for the Government to change tack to break the current political impasse by stepping up “no deal” planning, considering a second referendum, forcing a general election or shifting to a softer Brexit. But parsing through all …
18th December 2018
Today’s announcement of a change to how student loans will be classified in the public finances increases the risk that the Government misses its main fiscal target. But this shouldn’t cause investors to take fright or prevent the Chancellor from …
17th December 2018
After another turbulent week in UK politics, we are no closer to knowing what form Brexit will take. Nonetheless, we think that the chances of a softer Brexit or no Brexit – which would be sterling and growth positive – have risen. … Amidst the chaos, …
14th December 2018
In normal times, the MPC would be preparing the ground for another interest rate hike. After all, pay growth has picked up far more sharply than the Bank of England had anticipated. But as it is still unclear how Brexit will pan out, the Committee seems …
We are not convinced by the argument that stockpiling ahead of Brexit will provide a big boost to GDP growth over the coming months and prompt an abrupt fall thereafter. Given that a large proportion of stocks are imported, we suspect it will have very …
13th December 2018
The latest labour market data suggests that the Monetary Policy Committee could quickly turn hawkish if a no deal Brexit is avoided. In its November Inflation Report , the Bank of England forecast inflation to exceed its target throughout the next two …
12th December 2018
There are a myriad of different ways in which the UK political situation could play out. We can glean from recent markets moves that a disorderly Brexit would probably prompt sterling to fall further, but not collapse. The fact that bond yields have …
The latest labour market figures suggest that a recovery in real pay growth is taking root. This supports our view that GDP growth will rebound next year if a “no deal” Brexit is avoided. … Labour Market …
11th December 2018
The weaker GDP figures for October seem to be mainly a reflection of the unwinding of some temporary factors which had boosted growth in Q3, rather than a significant slowdown in underlying activity. Nonetheless, there is little chance of a rebound in …
10th December 2018
The deterioration in the business surveys in November was probably partly driven by growing fears that the Brexit mess will not be sorted out in time to avoid a no deal rather than an actual fall in activity. Meanwhile, this week’s Brexit crunch-point …
7th December 2018
The deterioration in the business surveys in November was probably partly driven by growing fears that the Brexit mess will not be sorted out in time to avoid a no deal. As such, economic activity will probably not slow as dramatically as the surveys …
6th December 2018
Following the solid rise in GDP in the third quarter, the recent news has been disappointing. The business surveys suggest that output barely increased at all in November. And following a brief period of resilience, the news on household spending has …
5th December 2018
It is not too surprising that we have now reached the point where the Brexit shenanigans are weighing more heavily on activity. But we suspect the Markit/CIPS survey is overstating the slowdown in growth. … Markit/CIPS Services PMI …
Markets are likely to be relatively nonplussed if Parliament narrowly rejects Theresa May’s Brexit deal. However, a decisive defeat may elicit significant moves in either direction, depending on whether a no deal Brexit or no Brexit at all seems more …
3rd December 2018
The rise in the manufacturing PMI in November suggests that a substantial fall in manufacturing output in Q4 will be avoided. However, the big picture is that the sector is struggling. … UK Markit/CIPS Manufacturing PMI …
The Bank of England’s harrowing assessment of the consequences of a “ no deal ” Brexit grabbed the headlines this week. But it was designed to be an extreme scenario, and based on some implausible assumptions. The Bank’s projection s based on a deal being …
30th November 2018
The weak tone of GfK/NOP’s Consumer Confidence Survey in November suggests that Brexit uncertainty is starting to weigh more heavily on confidence, which sets the stage for slightly weaker consumer spending growth in Q4. However, the outlook for 2019 …
Annual consumer credit growth continued to slow in October, reaching a three-year low, providing further evidence that consumers’ appetite for unsecured debt is waning a little. But so long as a Brexit deal is struck, we think that a continued recovery in …
29th November 2018
Not surprisingly, the Government report, published today, on the long-run economic impact of various Brexit scenarios is probably a little too pessimistic about the fallout from a no deal Brexit, but a little too optimistic about the impact of a deal …
28th November 2018
This week the Bank of England and HM Treasury will publish forecasts for the economy based on both the “deal” between the UK and the EU agreed on Sunday, and a “no deal, no transition” alternative. As a point of reference, this Update summarises our own …
27th November 2018
A rejection of the Brexit deal in Parliament in mid-December remains a very real prospect. And we would not rule anything out amidst the political chaos that would follow. In our predictions based on the various Brexit scenarios, the economy could grow by …
23rd November 2018
Recent Brexit developments have increased the chances of a second referendum and the possibility of the UK staying in the EU. The lengthy run-up to a second referendum would cause uncertainty to increase in the near term and weigh on economic growth next …
The Political Declaration on the future relationship between the UK and the EU sketches out an “ambitious” Canada-style free trade agreement. However, the absence of a solution to the Northern Ireland issue means that it does little to improve the chances …
22nd November 2018
It is possible that Theresa May will persuade enough MPs to back her deal in Parliament, if only by arguing that the alternatives are even worse. But it is far from certain. In this Update , we set out five possible outcomes if the deal is rejected in …
21st November 2018
Were the deterioration in the public finances in October to continue, the OBR would have to reverse some of the Budget upgrade to its forecast. Borrowing may well overshoot the OBR’s forecast this year if fears of a no deal Brexit intensify. But, as long …
The recent political chaos in Westminster means that the chances of the UK leaving the EU without a deal have risen, in our view, to about 50/50. In a no deal Brexit scenario, we would expect sterling to dip – although there are reasons to think that the …
20th November 2018
We think that policy makers would move quickly to help the economy to get back on track in the event of a “no deal” Brexit. Despite Mark Carney’s hints to the contrary, the MPC would probably cut interest rates, and the Chancellor would sacrifice his …
With Theresa May’s EU deal already seemingly dead in the water and speculation rife that a no-confidence vote in her leadership is imminent, the chances of the UK heading for either a “no deal” Brexit or, ironically, no Brexit at all, have risen. … Brexit …
16th November 2018
News that Theresa May could soon face a leadership challenge is the latest twist in the Brexit saga, but even if she survives, the key point is that the chances of her deal being passed by parliament are not looking good. There is therefore still a good …
15th November 2018
October’s official retail sales figures were weaker than expected. But a continued acceleration in real earnings, if a Brexit deal is signed (which admittedly, is looking less likely by the minute) should give household spending a boost next year. … …
The consumer price figures support our view that inflation will probably be back at the 2% target next year. Nonetheless, this is predicated on a Brexit deal being struck. In the event of a “no deal” Brexit, we would not be surprised if inflation …
14th November 2018
The rise in regular pay growth to a fresh post-crisis high and weak productivity growth suggests that we are right to think that rates will rise further than is priced into markets next year if a Brexit deal is agreed. … Labour Market …
13th November 2018
The next few weeks of Brexit negotiations will prove critical in determining whether a deal will be wrapped up by Christmas. We would not be surprised if the talks dragged on into the New Year, in which case the risk of no deal, which is already …
12th November 2018
Concern that increasing Brexit uncertainty is causing the economy to slow sharply, as indicated by the slide in the PMI survey, look overdone. Indeed, other indicators are less downbeat. And while external demand appears to have weakened, this shouldn’t …
We don’t find the apparent slowdown in economic growth at the start of Q4 too worrying. After all, growth was always likely to ease as the boost to the retail sector from hot weather and the football World Cup in the summer faded. And while optimism that …
9th November 2018
The GDP figures confirmed that economic growth accelerated in Q3. But it seems unlikely that the economy will be able to keep up this pace with Brexit uncertainty hanging over it. … GDP: First Estimate …
While new EU emissions tests for cars appear to be responsible for a slowdown in growth in the euro-zone in Q3, we doubt it will have had much impact on UK GDP growth. However, the tests do look likely to have distorted Q3’s expenditure breakdown. … Car …
7th November 2018
The hawkish tone of the Bank of England’s “Super Thursday” announcements have helped to push up interest rate expectations a little and have fuelled a rise in sterling over the past week. But we doubt that investors have gone far enough in revising up …
6th November 2018
The large fall in the PMIs in October suggests that the economy slowed sharply at the start of Q4. Admittedly, some slowdown from rolling three-month GDP growth of 0.7% in July and August always looked likely. Indeed, much of that strength can be put down …
5th November 2018
The big drop in the Markit/CIPS services PMI suggests that GDP growth slowed sharply at the start of Q4, which could be a sign that Brexit uncertainty is increasingly weighing on activity. So long as a Brexit deal is reached, however, there are good …
Philip “the fiscal hawk” Hammond was surprisingly generous in the Budget on Monday, spending his entire windfall from the downward revision to the OBR’s borrowing forecast. This means that rather than acting as a small headwind on growth next year, fiscal …
2nd November 2018
The fiscal loosening announced in the Autumn Budget has prompted us to raise our forecasts for GDP growth and interest rates. In our base case, which assumes a Brexit deal is secured, we now expect GDP to rise by 2.2% next year and by 2.0% in 2020 (up …
1st November 2018
The “Super Thursday” releases from the Bank of England support our view that the Monetary Policy Committee (MPC) will raise interest rates more quickly than markets expect, if a Brexit deal is struck. … MPC hints rates will rise quicker than markets …
The fall in the manufacturing PMI to its lowest level since immediately after the EU referendum suggests that the sector will drag on growth in Q4 as Brexit uncertainty weighs on investment and export orders. … UK Markit/CIPS Manufacturing PMI …
The weak tone of October’s GfK/NOP Consumer Confidence survey is not all that worrying, given that it appears to largely reflect seasonal factors. The bigger picture is that, so long as a Brexit deal is secured, the conditions for a continued recovery in …
31st October 2018
Things are finally looking up for consumers. Not only did yesterday’s Budget provide a welcome boost to households’ finances, but a recovery in real pay growth now appears to be taking root. … Autumn Budget improves consumer …
30th October 2018
This checklist is intended to help clients keep track of the key official forecasts and measures announced during the Chancellor’s Autumn Budget speech at 3.30pm Monday 29th October, and to provide some instant context. … UK Autumn Budget 2018 …
29th October 2018
September’s household borrowing figures provided further signs that consumers are becoming more wary about loading up on unsecured debt. But households remain upbeat about their financial position so any slowdown should not be too severe. In any case, the …
