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March’s BRC Retail Sales Monitor provided evidence that sales have recovered from the weak period at the start of the month, when snow deterred consumers from visiting the shops. Admittedly, some of the recovery can probably be attributed to the early …
10th April 2018
About a month ago, we warned that the severe weather around the start of March would make the economy look a bit fragile in Q1. Indeed, the weaker-than-expected services PMI survey, released this week, has raised concern that the economy has suffered a …
6th April 2018
The National Accounts showed that the economy barely slowed at all in 2017. Annual growth, revised up from 1.7% to 1.8%, was only marginally lower than 2016’s 1.9% outturn. Since then, however, the heavy snowfall at the start of March appears to have …
5th April 2018
The latest Markit/CIPS services survey suggests that the severe weather conditions in March held back the sector at the end of Q1. However, we don’t think that this will prevent the Monetary Policy Committee from raising interest rates again next month. … …
March’s Markit/CIPS report on manufacturing suggests that the recovery in the industrial sector lost a bit of steam in Q1. But it should still go some way to offsetting the weakness in high-street spending in early 2018. … Markit/CIPS manufacturing PMI …
3rd April 2018
The news on the state of households’ finances shows that recent spending growth has been partly driven by households saving less. But it should not be long before consumer spending is on a firmer footing. … Consumers relying on saving …
29th March 2018
February’s household borrowing figures showed that, following a small decline over the course of 2017, unsecured credit growth has stabilised. This suggests that consumers are continuing to take advantage of historically low interest rates in order to …
The recently announced US tariffs should have a limited direct effect on the UK economy. Admittedly, falls in equity prices – on the back of concerns over a full-blown trade war – could clearly have bigger knock-on effects on consumer spending and GDP …
Q4’s Quarterly National Accounts confirmed that growth in 2017 was broadly unchanged from 2016, and painted a more balanced growth picture for the final quarter. Meanwhile, the latest money and credit figures provide another reason to think that the …
March’s Gfk/NOP survey indicates that consumers were in good spirits at the end of the first quarter. And with real wages set to rise again in the coming quarters, there is scope for confidence and spending growth to strengthen further. … GfK/NOP Consumer …
The severe weather at the start of March saw the CBI Distributive Trades Survey balances take a turn for the worse. But with the economic drivers of consumer spending finally showing signs of improvement, the weakness should prove temporary. … CBI …
28th March 2018
Large variations between the different official measures of GDP growth have left it unclear whether the UK economy accelerated or slowed following the EU referendum. And a renewed divergence between the survey and official data has raised similar …
As expected, on Friday the EU Council endorsed a transition period and the opening up of a new strand of negotiations on the future relationship. But unless the UK can come up with a solution to the Northern Ireland border issue, under the terms of the …
23rd March 2018
With another hike in interest rates in May now largely priced into markets (and supported by this week’s Monetary Policy Committee (MPC) Minutes), the bigger question is just how “limited and gradual” the rise in interest rates will be thereafter. Markets …
February’s retail sales figures showed that spending growth has been fairly feeble so far this quarter. As such, it would now take a monthly increase in excess of 2% in March to see sales in Q1 match Q4’s 0.5% rise. But this seems extremely unlikely given …
22nd March 2018
While the Monetary Policy Committee (MPC) stopped short of explicitly committing to another interest rate hike in May, the Minutes of March’s meeting suggest that it is highly likely. … MPC still on track for a May …
Despite February’s bigger-than-expected rise in retail sales volumes, the big picture is that spending growth is still pretty sluggish. But with the real pay squeeze coming to an end, the outlook for spending is looking up. … Retail Sales …
The easing in output expectations among manufacturers in the CBI’s Industrial Trends Survey suggests that the boost to manufacturing output from the pound’s depreciation has faded somewhat. But given the survey has undershot the hard data recently, and …
21st March 2018
January’s labour market figures provided clearer signs of a revival in earnings growth, suggesting that it won’t be long before we start to see sustained rises in real pay. Meanwhile, government borrowing remains on track to undershoot the OBR’s forecast …
The fall-back in CPI inflation in February from 3% in January to 2.7% confirms that we have now reached a turning point, but doesn’t significantly diminish the case for a near-term interest rate hike. … Consumer Prices & Producer Prices …
20th March 2018
It is widely expected that the EU Council will on Thursday confirm that the UK will enter into a transition period following its departure from the EU next March. That said, judging by the EU’s latest draft of the withdrawal agreement, any agreement would …
16th March 2018
Following November’s Autumn Budget, we argued that the Office for Budget Responsibility (OBR) had become too pessimistic about the outlook for economic growth. Although the economy has performed better than expected, while the public finances have …
While the Bank of England’s Financial Policy Committee (FPC) left its annual stress test scenario unchanged, the test will still be a bit more stringent this year for some major UK banks. Nonetheless, it seems unlikely that these banks will be required to …
With no Monetary Policy Committee (MPC) meeting scheduled in April, its meeting on 22nd March will be the last opportunity for the MPC to lay the groundwork for another interest rate hike in May. Markets are pricing in around a 70% chance of one. But with …
15th March 2018
The sell-off in gilts, which saw the 10-year yield rise from 1.2% at the end of 2017 to a peak of close to 1.7% by mid-February has abated. The benchmark yield is now back around 1.5%. Indeed, the economic data has disappointed over the past month or so, …
14th March 2018
This checklist is intended to help clients keep track of the key economic and fiscal forecasts announced during the Chancellor’s Spring Statement at 12.30pm Tuesday 13th March 2018 and to provide some instant context. Note that following the Chancellor’s …
12th March 2018
Draft EU guidelines on the future relationship between the UK and the EU reiterated that the EU sees a Canada-style Free Trade Agreement as the best possible trading arrangement consistent with the UK leaving the Single Market and Customs Union. … EU …
9th March 2018
The likely dent to retail sales, spending on consumer services and construction output as a result of February’s bad weather will make the economy look fragile. But the hit to the economy will be cushioned by households spending more to heat their homes. …
January’s output data was disappointing. That said, the manufacturing sector is still growing strongly by past standards, while the surveys continue to point to GDP growth holding broadly steady. … Industrial Production, Construction & Trade …
While it is some way off yet, some have argued that the ending of compensation related to mis-sold PPI will remove a valuable support to consumers who are facing falling real wages and higher interest rates. However, a near-term pick-up in compensation …
7th March 2018
Following a downward revision to quarterly GDP growth in Q4, from 0.5% to 0.4%, a deterioration in all three of the headline PMI balances in January raised concerns that growth had continued to slow at the start of the year. But those fears were assuaged …
6th March 2018
February’s BRC Retail Sales Monitor tentatively suggests that spending growth is turning a bit of a corner. And with the worst of the pay squeeze having passed, the outlook for growth is looking up. … BRC Retail Sales Monitor …
The rise in the services PMI in February will help to assuage fears of a broad-based slowdown in Q1, instead suggesting that the economy has broadly maintained its pace. That should keep the door open for the Monetary Policy Committee to hike interest …
5th March 2018
On the basis of this week’s developments, an agreement on a transition deal by the March European Council meeting hangs in the balance. Meanwhile, the Brexit vision that the Prime Minister set out on Friday contained less “cakeism” than earlier speeches, …
2nd March 2018
Recent data have raised fears that the long-awaited recovery in the manufacturing sector is coming to an end before it really had a chance to get going. One possible explanation for the recent weakening in the surveys is that the boost from the lower …
January’s household borrowing figures will help to assuage fears that the slowdown in the housing market is gathering pace. And consumers still appear confident enough to borrow to smooth their spending. … Household Borrowing Monitor …
1st March 2018
February’s manufacturing PMI suggests that the sector has lost some momentum in Q1. But the details of the survey were more encouraging, and there is little sign in the latest money and credit figures that this weakness is broadening out to the rest of …
Consumer confidence edged back down in February, but the big picture remains that consumers are still weathering the squeeze on their spending power relatively well. … GfK/NOP Consumer …
28th February 2018
Financial markets are now pricing in a 60% probability of the Monetary Policy Committee (MPC) raising Bank Rate by a further 25bps in May, up from around 40% at the start of the year. But we still think investors are underestimating the pace of tightening …
26th February 2018
The “Canada plus, plus, plus” deal, including single market participation for some sectors, which UK Cabinet ministers reportedly agreed to this week is unlikely to be accepted by the EU in its current form. … Cabinet consensus won’t unlock …
23rd February 2018
Recent news on the UK economy, including the downward revision to Q4 GDP growth, appears to have lent more support to the consensus forecast of slower growth in 2018 than to our prediction of an acceleration. But it’s too early to throw in the towel. Not …
Despite the fall back in the headline reported sales balance, the survey still points to retail spending growth at least maintaining its current pace. And the forward-looking balances paint an upbeat picture. … CBI Distributive Trades Survey …
22nd February 2018
The second estimate of Q4 GDP revealed that the economy grew by a downwardly revised 0.4% q/q in the final quarter of 2017, with annual growth revised down from 1.8% to 1.7%. Encouragingly, however, investment growth has remained strong. And with …
Although unemployment rose in December, employment continued to grow strongly and the surveys suggest that this pace of growth will be sustained in the coming months. Meanwhile, government borrowing still looks on track to undershoot the OBR’s forecast …
21st February 2018
February’s CBI Industrial Trends Survey suggests that the growth of manufacturing output may have slowed a bit at the start of the year. But the big picture remains that the sector is still performing well by recent standards. … CBI Industrial Trends …
20th February 2018
Given that the UK Government has disagreements with the EU over the scope of the transition deal, and no new solutions to avoiding a hard border on the island of Ireland have been proposed, there is a risk that next week’s negotiations, which focus only …
16th February 2018
Inflation proved unexpectedly sticky in January, remaining unchanged at 3.0%, contrary to the consensus expectation for it to fall. However, we don’t think that the Monetary Policy Committee (MPC) needs to worry about runaway inflation. Indeed, sterling’s …
It is always a challenge to get a proper reading of the underlying strength of consumer spending growth around this time of year, with changing seasonal sales patterns (including the introduction of Black Friday) altering shopping habits. The survey …
With real incomes under pressure from weak nominal pay growth and above-target inflation, it isn’t surprising that high-street spending growth has continued to lose momentum. But the worst of the real pay squeeze should now have passed, paving the way for …
The increase in markets’ expectations for official interest rates that occurred in the build-up to the Monetary Policy Committee’s (MPC’s) February Inflation Report proved justified. The MPC revised up its projections for economic growth, and the language …
14th February 2018
