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Despite holding steady in January, we continue to think that CPI inflation will gradually drift downwards over the course of 2018. However, we still think that the Monetary Policy Committee will raise interest rates by more than markets expect. … Consumer …
13th February 2018
While the sell-off in financial markets over the past week or so has been abrupt, we don’t think that it currently poses a big threat to the economic outlook. The relationship between equity prices and GDP growth is not particularly strong, and the …
9th February 2018
This week saw negotiations resume for the first time since the EU Council agreed in December that talks could move on to a possible transition period. However, UK Government objections to some of the terms offered by the EU for the transition period mean …
The deluge of hard data for December provides further evidence that it was the domestic demand and the services sector that drove the pick-up in growth in Q4. However, temporary distortions mean that we expect industrial production and net trade to …
The “Super Thursday” releases from the Bank of England support our long-held view that the Monetary Policy Committee would become less dovish as the economy beat expectations. Indeed, we expect the next hike to come in May and, with the MPC wanting to …
8th February 2018
The survey evidence released so far paints a pretty downbeat picture for growth at the start of the year. Indeed, falls in the manufacturing, construction and services sector PMI left the all-sector index consistent, on the basis of past form, with …
6th February 2018
January’s BRC Retail Sales Monitor suggests that high-street spending growth maintained a steady pace at the start of 2018. But with inflation set to fall back this year, easing the squeeze on real incomes, there is scope for a pick-up in spending growth …
Following falls in the manufacturing and construction surveys released last week, the weak January services sector survey suggests that the economy lost the momentum it gained in Q4 at the start of 2018. However, we doubt that this is a sign of things to …
5th February 2018
The revelation that the Department for Exiting the EU (DExEU) has produced an assessment of the likely impact of various Brexit options on the economy has dominated the press this week, but does not really tell us anything new. A more significant …
2nd February 2018
We have long-argued that interest rates would rise somewhat faster, and sooner, than markets expecting. Recent comments by Governor Carney offer tentative support to this view and suggest that February’s Inflation Report could strike a more hawkish tone …
With the data continuing to surprise the Monetary Policy Committee (MPC) on the upside and the Governor sounding encouraged by progress in Brexit negotiations and a bit more upbeat on the outlook, there is a chance that the Inflation Report on February …
1st February 2018
The fall in the PMI in January suggests that manufacturing growth slowed a little at the start of the year. But the big picture is that the sector is still performing well by recent standards. … Markit/CIPS Manufacturing PMI …
January’s GfK/NOP confidence survey suggested that consumers started the year in fairly good spirits. And with real earnings likely to recover in the second half of this year, there is scope for confidence to pick up further and spending growth to regain …
31st January 2018
December’s household borrowing figures revealed a widening divergence between borrowing to fund a house purchase and borrowing to fund other areas of spending. However, we don’t think that policymakers will feel compelled to stamp out the rise in credit …
30th January 2018
There are some reasons to think that the pound’s recent rally may struggle to go much further. Rising US interest rates could prompt something of a recovery in the ailing dollar, while Brexit uncertainty could rise again as the negotiations move on to the …
26th January 2018
The EU will publish its directives for negotiating a transitional arrangement on Monday, signalling the start of the next phase of negotiations. The UK Government seems prepared to accept the EU’s terms for a transition period which should allow it to be …
The preliminary estimate of Q4 GDP revealed that the economy picked up pace in the final three months of 2017, rounding off a solid, albeit unspectacular year. This supports our view that the consensus is too downbeat on growth in 2018 and that the MPC …
All the main balances of the CBI’s Distributive Trades Survey fell back in January. Nonetheless, the survey’s past relationship with the official figures continues to point to solid retail sales growth. … CBI Distributive Trades Survey …
25th January 2018
Stockbuilding probably knocked about 0.2pp off GDP growth last year. But there are a number of reasons to think that won’t be repeated, leaving us happy with our above-consensus forecast for GDP growth. … Will stockbuilding weigh on growth again this …
24th January 2018
The latest labour market figures provided further reassurance that the economy held up in the fourth quarter of last year. With survey indicators suggesting that jobs and wage growth should continue to pick up, we continue to expect the MPC to raise …
January’s CBI Industrial Trends Survey painted a relatively upbeat picture, suggesting that the manufacturing sector has carried a decent amount of momentum into 2018. … CBI Industrial Trends Survey …
23rd January 2018
December’s figures brought yet more good news on the current health of the public finances. And we think that stronger GDP growth will result in a more rapid improvement further ahead. … Public Finances …
December’s retail sales figures were pretty disappointing, suggesting that the sector grew by 0.4% in Q4 as a whole, half of Q3’s 0.8% rate. What’s more, growth in non-retail spending is likely to have been subdued in Q4 too. The rebound in car sales …
With the rise in the pound to its highest level against the US dollar since the eve of the EU referendum not appearing to be justified by relative interest rate expectations, some have argued that it may reflect investors becoming more optimistic, or …
19th January 2018
The recent rise in the pound against the dollar to almost $1.40, its highest level since the eve of the EU referendum, raises some concerns that a valuable source of support to economic growth – namely the boost from net trade – could soon be snuffed out. …
December’s retail sales figures were pretty disappointing. But some fall-back had always looked likely, given November’s hefty rise. And with inflation likely to have now peaked, the worst of the real pay squeeze should have passed, paving the way for a …
UK equity prices have risen substantially over the past month alongside those in other developed markets, with the FTSE 100 up by around 3%, to 7,700 points. What’s more, this gain in the FTSE has not merely been a by-product of sterling weakness – the …
18th January 2018
The fall-back in CPI inflation from 3.1% in November to 3% in December probably marks the beginning of what we expect will be a sustained downward trend over the course of 2018. Despite this, we still think that the Monetary Policy Committee (MPC) will …
16th January 2018
The possibility of a second referendum was again raised this week, but the chances of another vote happening appear slim. Meanwhile, we still expect a transitional deal to be agreed by March. But the UK’s ambition to maintain free trade in services …
12th January 2018
The recent spate of positive economic news has prompted some to raise their forecasts for Q4 quarterly growth to as much as 0.6%, double the average seen in 2017 so far. We have our doubts over whether GDP growth did grow by much more than Q3’s 0.4% rate. …
The latest hard data for Q4 supports the view that the UK economy maintained a reasonable amount of momentum, and offers some tentative signs that net trade may have provided a bigger boost to growth. … Industrial Production, Construction & Trade …
10th January 2018
December’s BRC Retail Sales Monitor suggested that Christmas trading failed to provide much relief to retailers with spending growth broadly in line with its subdued average over the past year, as the squeeze on real incomes has continued to leave …
9th January 2018
Recent evidence suggests that high-street spending has provided decent support to GDP growth in Q4. Admittedly, a weaker performance off the high street suggests that overall quarterly consumer spending growth probably slowed a little. But at least the …
5th January 2018
The latest survey evidence suggests that the economy ended 2017 on a reasonable footing. Indeed, despite a fall-back in both the manufacturing and construction PMI surveys in December, the all-sector PMI points to quarterly GDP growth of around 0.5%, a …
4th January 2018
November’s household borrowing figures will help to assuage fears that the slowdown in the housing market is gathering pace. And with consumers’ appetite for unsecured loans remaining strong, this provides another reason to think that consumer spending …
The rise in December’s Markit/CIPS services PMI provides some reassurance that the economy did not lose pace at the end of the year, following the disappointingly-weak manufacturing and construction surveys. And looking ahead, we expect the economy to …
December’s Markit/CIPS manufacturing survey suggests that the sector provided valuable support to GDP growth in Q4. … Markit/CIPS Manufacturing PMI …
2nd January 2018
While the latest Quarterly National Accounts has raised further questions about the sustainability of consumer spending growth, we think that consumers will continue to ride out the real pay squeeze well. … Consumer spending …
22nd December 2017
Christmas has come early with the ONS’ annual data deluge before the festive break. The upward revision to annual growth paints 2017 in a better light, while the latest data provided a more balanced growth picture for the third quarter. … Quarterly …
November’s public finances figures brought more good news on the current health of the public finances. And we think that stronger GDP growth will result in a more rapid improvement further ahead. … Public Finances …
21st December 2017
The slight fall in the GfK/NOP measure of consumer confidence in December is not cause for alarm. Indeed, the forward-looking balances were unchanged. And with inflation now likely to be at its peak, the squeeze on real wages should abate over the course …
This time last year, the consensus view was that the UK economy would grow by only 1% or so in 2017. But it now looks as though the economy will expand by a more reasonable 1.5%. Of course, there is a possibility that the negative effects of …
20th December 2017
The robust CBI Distributive Trades survey for December suggests that November’s strength in the official retail sales figures should be sustained in the final month of the year. … CBI Distributive Trades Survey …
Unsurprisingly December’s uneventful Monetary Policy Committee (MPC) meeting barely caused a ripple in financial markets, leaving market participants’ expectations for future interest rates all but unchanged. But we suspect that market expectations for …
19th December 2017
December’s CBI Industrial Trends Survey painted a mixed picture for the manufacturing sector, with output expectations remaining weak despite order books continuing to swell. … CBI Industrial Trends Survey …
18th December 2017
The EU Council’s decision to sign off “sufficient progress” opens the door to agreeing a transition period, which would see the UK remain in the Customs Union and Single Market until 2021, early next year. But determining post-transition arrangements is …
15th December 2017
With inflation rising above 3% in November, there are some reasons to think that it has now reached a peak. It remains the case that the primary driver of the rise in inflation has been the slide in sterling. However, its impact does appear to be fading, …
With real incomes under pressure from subdued nominal pay growth and rising inflation, the strong rise in retail sales volumes in November is encouraging. However, spending on the high street might have come at the expense of non-retail spending. And in …
14th December 2017
As was widely expected, December’s Monetary Policy Committee meeting was a bit of a non-event. However, if we are right in expecting the economy to perform more strongly than the MPC expects, that should allow interest rates to be raised several more …
The official retail sales figures suggest that “Black Friday” discounts provided a significant boost to high-street spending in November. But consumers may now have done the bulk of their Christmas shopping, meaning that December’s sales could be weak. … …
