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As well as being the end of the year, it is now six months since the UK voted to leave the EU and so it is a good time to take stock of where we are, what we got right, what we got wrong, and what to expect in 2017. The early evidence suggests that our …
23rd December 2016
The latest Quarterly National Accounts suggest that the economy grew more quickly after the referendum than previously estimated. Moreover, the latest surveys suggest that the economy will turn in another solid performance in Q4. … National Accounts & …
While consumer confidence rose slightly in December, the headline balance suggests that the strong pace of retail spending won’t last too much longer. That said, low interest rates and a resilient labour market should ensure that spending growth still …
22nd December 2016
The improvement in the public finances in November leaves borrowing on track to meet the OBR’s Autumn Statement forecasts for the current fiscal year. And we think stronger GDP growth will result in a more rapid improvement further ahead. … Public …
21st December 2016
On the face of it, the early evidence suggests that exporters are using the drop in the pound to boost margins as opposed to market share. This poses a risk to our optimistic forecasts for exports, but does not necessarily weaken the outlook for GDP …
20th December 2016
December’s CBI Distributive Trades Survey suggests that retail spending has put in a strong performance during the festive period. However, consumer spending growth still looks set to slow in the coming quarters. … CBI Distributive Trades Survey …
This week has brought further indications that the Government is leaning towards a soft(ish) form of Brexit and some sort of transitional arrangement. Meanwhile, the economy has continued to hold up well. But the adverse effects of sterling’s slump are …
16th December 2016
The MPC has not surprisingly emphasised the importance of inflation expectations in determining the degree to which it is prepared to tolerate an overshoot of the inflation target. After all, low inflation expectations appear to have helped to keep wage …
December’s CBI Industrial Trends Survey offered another reason to think that the manufacturing sector is in better health than the recent weak official data suggest. … CBI Industrial Trends Survey …
There has been no sign of a let-up in the strong pace of high-street spending growth at the start of the festive season. But it seems doubtful that spending will maintain its recent strength in the New Year. For a start, inflation will probably breach the …
15th December 2016
The unanimous decision by the Monetary Policy Committee (MPC) to leave interest rates on hold and the scale of its asset purchases unchanged, at the same time as the US Fed has resumed tightening policy, highlights the likely divergence in policy rates …
Retail sales growth continued to rise in November, following October’s surge, suggesting the retail sector will provide strong support to GDP growth in Q4. Nonetheless, the rate of spending growth looks unsustainable, due to the number of headwinds that …
The continued rally in sterling over the past month or so means that it is now around 10% lower on a trade-weighted basis relative to where it stood on the eve of the EU referendum, rather than the 15% that had been the case when talks of a “hard” Brexit …
14th December 2016
There are some tentative signs that the jobs market has lost some of its earlier strength. But we don’t expect any weakening to be particularly severe. … Labour Market …
The rise in CPI inflation is part of an upward trend which will see inflation peak at about 3% in early 2018. However, we don’t think it will trouble the MPC too much. … Consumer Prices & Producer Prices …
13th December 2016
Although we won’t know the outcome of this week’s Supreme Court hearing until (probably) January, whichever way it goes, the Government may still be able to trigger Article 50 by March 31st. That said, with the EU’s chief negotiator highlighting the tight …
9th December 2016
There are concerns that the expected rise in inflation will cause consumer spending growth to slow sharply ahead. Indeed, households would probably have to run their saving rates far below all-time lows in order to maintain their recent pace of spending …
The UK’s trade deficit narrowed sharply in October, following a large upward revision to the Q3 deficit. And the drop in the pound should support net trade’s contribution to GDP growth in the coming months. … Trade …
The Monetary Policy Committee (MPC) will take some comfort from recent data suggesting that the economy has maintained its momentum in Q4, while sterling’s recovery may have lessened the extent to which inflation will overshoot the MPC’s target. …
8th December 2016
October’s industrial production figures showed that the sector started Q4 on a weak footing, following the contraction experienced in Q3. However, the outlook for the sector further ahead appears brighter. … Industrial Production …
7th December 2016
November’s BRC Retail Sales Monitor indicated that shoppers can still be tempted by a bargain, despite weakening confidence. But the fundamentals still point to a slowdown in spending ahead. … BRC Retail Sales Monitor …
6th December 2016
Both households and businesses appear to have been undeterred by Brexit uncertainty in Q3. What’s more, the latest business surveys suggest that the economy will turn in another solid performance in Q4. Gains in both the Markit/CIPS services and …
5th December 2016
November’s Markit/CIPS Report on Services suggests that the UK economy will turn in another solid performance in Q4. … Markit/CIPS Report of Services …
There have been further indications this week that the government is moving away from some of the “hard Brexit” rhetoric which had emerged in recent months. That said, the government faces a difficult battle with the public, as immigration was shown to …
2nd December 2016
The past few weeks have brought yet more relatively upbeat economic news and the first estimate of investment in Q3 was no exception. But we wouldn’t read too much into a single set of figures. And economists’ forecasts for investment growth in 2017 – …
November’s Markit/CIPS manufacturing PMI implies that the sector has gained some momentum, following a post-referendum contraction. This should help ensure GDP growth doesn’t slow too much in the near term. … Markit/CIPS Report on Manuf. …
1st December 2016
While the Bank of England’s Financial Stability Report (FSR) suggested that the UK financial system has fared well during recent uncertainty, it highlighted lingering risks. Nonetheless, we think that some of these risks could have a positive element to …
30th November 2016
The stumble in consumer confidence in November is another sign that the recent strength in spending is unlikely to last. Nonetheless, low interest rates, a resilient labour market, and less fiscal tightening than previously planned should ensure that …
October’s household borrowing figures provided further evidence that the slowdown in mortgage lending has bottomed out and that consumers’ appetite for debt hasn’t been affected much by the Brexit vote. … Household Borrowing Monitor …
29th November 2016
This week brought the Office for Budget Responsibility’s (OBR) first assessment of the effect of the Brexit vote on the economy and the public finances. This was more upbeat than had been anticipated prior to the referendum but, even so, drew criticism …
25th November 2016
The net giveaway to consumers in the Autumn Statement was small compared to previouslyannounced takeaways. Accordingly, fiscal policy should still weigh on households’ spending power over the next few years. … Chancellor “just about manages” to help …
The Office for Budget Responsibility’s economic forecasts garnered more attention than usual after last week’s Autumn Statement, and have been criticised by some for being too gloomy on Brexit. On the face of it, this criticism seems unwarranted, given …
November’s CBI Distributive Trades Survey suggests that consumer spending has held up well in Q4. However, we still expect a slowdown in the coming quarters. … CBI Distributive Trades Survey …
The second estimate of Q3 GDP left the quarterly rise unrevised at 0.5% and suggested that firms and households have been undeterred by the Brexit vote. Meanwhile, business surveys suggest that the economy has sustained this pace since. … GDP: Second …
Philip Hammond’s first (and last) Autumn Statement has been generally well received as a compromise between the conflicting needs to repair the UK public finances and provide the economy with more support after the vote for Brexit. But we think he missed …
24th November 2016
This checklist is intended to help clients keep track of the important measures and numbers announced during the Autumn Statement at 12.30pm and to provide some instant context. … UK Autumn Statement 2016 …
22nd November 2016
The recent rise in gilt yields has fully reversed the falls seen after the EU referendum. Although they have followed Treasury yields up following Trump’s election victory, this is not the whole story. The fall in sterling – as a result of growing …
November’s CBI Industrial Trends Survey provided another indication that economic growth has been better-balanced in Q4. However, it highlighted the impact that the drop in the pound is beginning to have on price pressures. … CBI Industrial Trends Survey …
While Chancellor Hammond would have welcomed October’s improvement in the public finances, it is unlikely to be a sign of things to come. This will probably prevent him from being too bold in the Autumn Statement. … Public Finances …
The rumour mill has been a little quieter than usual. But the Chancellor is surely piecing together a package of giveaways for his Autumn Statement – perhaps something in the region of about £7bn in 2017/18 – which focuses on increased infrastructure …
18th November 2016
This week brought some more mixed news on the state of the economy after the referendum, but markets have revised up their expectations for interest rates, and gilt yields have risen, regardless. … Brexit Watch: Some more mixed news on the …
After narrowly avoiding EU fines for its excessive fiscal deficit, the Portuguese Government has a lot of work to do to get its finances in order. But strong political resistance to austerity and continued slow economic growth mean that the deficit is …
17th November 2016
October’s retail sales figures provided further evidence that shoppers remain undeterred by the Brexit vote. Nonetheless, this rate of spending growth looks unsustainable, and there are a number of headwinds on the horizon. … Retail Sales …
Today’s figures confirmed the indications from the surveys that the leave vote is starting to sap the jobs recovery of its previous strength. … Labour Market …
16th November 2016
The fall in inflation in October was a temporary stumble along the upward path that should see inflation breach its 2% target in 2017. This will eat into real incomes, but other supportive factors should ensure consumer spending doesn’t slow too sharply. …
15th November 2016
Donald Trump’s victory has exacerbated the upward movement in Treasury yields, pushing 10-year UK gilt yields higher too. Meanwhile, market participants have revised up their expectations for official interest rates in the UK further over the past month …
14th November 2016
Today’s figures confirmed the indications from the surveys that the leave vote is starting to sap the jobs recovery of its previous strength. … Brexit Watch: Trump helps sterling find …
11th November 2016
We have argued that there are good reasons to think that the economic ramifications for the UK of Donald Trump’s victory in the US election are unlikely to be very large. However, at the margin, his proposed large fiscal stimulus might help Chancellor …
The latest trade figures highlighted that a better performance from the external sector was one of the factors behind the strength of GDP growth in Q3. And the drop in the pound should have some stronger beneficial effects in time. … Trade …
9th November 2016
While Donald Trump’s victory in the US Presidential election adds another element of uncertainty to the UK’s economic outlook, there are reasons why the consequences for the UK may be smaller and less adverse than those in some other areas. … Trump …
