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The Financial Policy Committee (FPC) had a lot on its plate at last week’s meeting, with concerns about the impact of a Brexit only adding to the long list of existing risks to financial stability. Even if the FPC chooses to stand pat again at this …
24th March 2016
The consumer recovery is still going strong, with household spending the driving force of the overall economic recovery. Although the retail sales figures have been a bit volatile recently, the underlying trend still looks robust. That said, price …
We doubt that February’s dip in retail sales is the beginning of a more pronounced slowdown in the pace of the consumer recovery. What’s more, while there are some headwinds to spending growth, the outlook remains fairly bright . … Retail Sales …
By promising no further welfare cuts, the Government has ruled out yet another way of raising some money should it need to. This suggests that the Conservatives will struggle to meet their strict fiscal rules if the OBR’s forecasts deteriorate further or …
23rd March 2016
Online sales growth – while still very strong – has been slowing over recent years. However, we think the big slowdown in growth should be behind us, with innovations in mobile technology and internet shopping providing plenty of scope for further growth. …
February’s disappointing public finances figures were yet another blow for the Chancellor by suggesting the OBR’s new forecasts published in last week’s Budget already look too optimstic . Meanwhile, the unchanged inflation rate of 0.3% in February …
22nd March 2016
Despite some improvement, March’s CBI Industrial Trends Survey indicates that the manufacturing sector recovery remains sluggish, although there are some reasons for optimism further ahead. … CBI Industrial Trends Survey …
21st March 2016
Large parts of the Budget were clearly aimed solely at repairing the damage that the OBR’s new economic forecasts did to the Chancellor’s chances of meeting his fiscal target. That said, there is clearly a big question mark over whether Mr Osborne really …
18th March 2016
February’s consumer prices figures should show inflation creeping further above the zero rates seen for most of last year. Although the risk of a relapse cannot be entirely ruled out – if, for example, the economy deteriorates a lot further – it now …
The OBR’s decision to cut its productivity growth forecasts left the Chancellor scrambling to find some money to achieve his 2019/20 surplus goal. But we think that productivity growth will be much stronger than the OBR expects, giving the Chancellor an …
While the measures announced at yesterday’s Budget amounted to a small net giveaway to consumers, the bigger picture is that a significant fiscal squeeze still lies ahead. And although retailers did not come away empty handed, the measures will have …
17th March 2016
The MPC’s decision to leave interest rates on hold at 0.5% today – marking the 7th anniversary of rates being at this record low – was unsurprising given the softness of recent activity indicators and heightened uncertainty about the economic outlook. The …
With the Chancellor setting the backdrop to this afternoon’s Budget as one where the global “storm clouds” are gathering, today’s labour market figures offer a ray of sunshine. However, wage growth is still fairly subdued by past standards, which will …
16th March 2016
While we think the UK will do well either inside or outside the EU in the long run, there is potential for a short-term hit to investment in particular. But we don’t think that this would derail the recovery. … UK Budget 2016 …
15th March 2016
Concerns about the strength of the global economy have eased over the past month, boosting market sentiment. This comes despite ongoing worries about the upcoming EU referendum and domestic activity indicators, such as February’s Markit/CIPS PMI, …
The possibility of a Brexit has raised a number of worries for British retailers, including the prospect of falling consumer demand and rising imported goods costs. But while the short-term impact of a decision to leave the EU might be negative for …
14th March 2016
The two main events this week – the Budget and MPC decision – will highlight the divergence between monetary and fiscal policy stances. With Bank Rate likely to be held at 0.5%, marking seven full years at a record low, monetary policy is doing a great …
11th March 2016
With recent survey evidence suggesting the economic recovery has lost some pace at the start of the year, today’s trade figures suggest that growth was worryingly unbalanced too. … Trade …
Recent developments are unlikely to have caused Monetary Policy Committee (MPC) members to fundamentally change their view since they voted unanimously to leave rates on hold in February. Indeed, there is nothing in the data that should push the more …
10th March 2016
News that a number of retailers are seeking to shrink their workforce this year suggests that the jobs recovery that only really got underway in late-2013 may be over already. What’s more, the BRC has issued a dire warning, predicting that there could …
After experiencing the largest monthly fall in three years in December, UK industrial production started 2016 on a somewhat more positive note. However, external factors suggest there won’t be much further improvement in the near term. … Industrial …
9th March 2016
After a surprisingly-strong start to the year, February’s BRC sales figures showed retail sales growth moderating. With temporary supports set to fade, 2016 looks likely to be a solid, rather than spectacular, year for consumers. … BRC Retail Sales …
8th March 2016
While we think the UK will do well either inside or outside the EU in the long run , there is potential for a short-term hit to investment in particular. But we don’t think that this would derail the recovery. … Investment would bear the immediate …
7th March 2016
Capital Economics does not have a strong axe to grind either way on the EU question. But we do feel that many of the arguments put forward on both sides are exaggerated – including those from the Government last week. We may soon get a brief respite …
4th March 2016
Global growth worries and uncertainty surrounding the upcoming Brexit referendum seems to have finally dented UK activity. Indeed, all three Markit/CIPS surveys fell in January. The composite PMI now points to quarterly GDP growth of only around 0.3% …
3rd March 2016
This report is only available as a PDF. Click to download. … Markit/CIPS Report on Services (Feb.) …
One of the advantages of a vote to leave the EU would be the savings the UK could potentially make on its EU contributions. This money could in theory be used to give a boost to the economy, but there are reasons why this might not happen in practice. … …
1st March 2016
The February UK Markit/CIPS manufacturing survey showed that the sector doesn’t appear to be doing any better so far in 2016 than it did in 2015. But the manufacturing sector’s prospects should improve slightly as the year progresses. … Markit/CIPS …
January’s household borrowing figures will only have added to mounting concerns regarding rapid unsecured credit growth and the sustainability of the consumer recovery. However, at this stage we do not consider the current expansion of consumer credit a …
29th February 2016
Brexit unsurprisingly dominated the news again last week, especially its continued downward impact on sterling. As the referendum nears, we expect to see further falls in the pound. However, this should not be viewed as an entirely negative development, …
26th February 2016
February’s consumer confidence figures show that consumers are becoming increasingly concerned about general economic uncertainty. However, they remain upbeat by past standards, and this should help household spending to keep growing at a solid rate in …
With GDP still estimated to have risen by a quarterly 0.5% in Q4 of last year, the UK recovery is still looking solid, but unspectacular. A number of clouds loom on the horizon, but we don’t think that a sharp slowdown is in store. … GDP: Second …
25th February 2016
Following the strong official retail sales figures in January, February’s CBI Distributive Trades Survey proved very disappointing reading. But we remain upbeat about the near-term prospects for high-street spending. … CBI Distributive Trades Survey …
24th February 2016
2015 was a good year for the consumer recovery and 2016 looks like it started off on a good footing, with strong retail spending and car registrations in January. The picture for spending in the near term looks positive, with the direct impact of energy …
23rd February 2016
Sterling remains the main casualty of Brexit uncertainty and we expect the pound to fall further as the referendum nears. However, this should not be viewed as an entirely negative development, as the much longed-for rebalancing of the economy probably …
The deal which looks likely to be sewn up at this week’s EU Council meeting should pave the way for David Cameron to announce a date for the EU referendum soon and officially launch his campaign to remain in a “reformed EU”. However, we doubt the deal …
19th February 2016
We think that recent fears about a global slowdown, and hence the reaction in financial markets, have been overdone. In fact, we expect global growth to accelerate this year and the prices of most commodities to recover, partly as a consequence of better …
One of the main areas of concern in markets in recent weeks has been the banking sector, both in the UK and overseas. However, we do not think that this pessimism about the UK’s banking sector is justified. For a start, we have pointed out before that UK …
The Chancellor will welcome today’s better news on the public finances, ahead of the Budget next month, while January’s retail sales figures suggest that the consumer recovery remains in full swing. … Public Finances & Retail Sales …
While most developments since November’s Autumn Statement bode poorly for the public finances, lower interest rates should provide an offset. However, the Chancellor would be unwise to spend this windfall as this impact could easily be reversed in …
18th February 2016
Talk of a UK interest rate cut has resurfaced in recent weeks, following the deterioration in global market sentiment and the moves by other central banks to cut rates. There is certainly scope for the Bank of England to cut rates further, but we think …
17th February 2016
The soft UK pay growth shown in today’s labour market figures – which is still at odds with the tightening labour market – highlights why the MPC won’t be raising rates anytime soon … Labour Market Data …
January’s consumer prices release showed the UK moved further away from deflation – due to easing fuel price deflation rather than a core-price inflation rise. … Consumer Prices & Producer Prices …
16th February 2016
The further bout of financial market turmoil last week has raised fears that a sharp slowdown in the UK economy may be on the horizon. But the strength of the labour market, loose monetary policy and the prolonged boost to households’ spending power from …
12th February 2016
January’s consumer prices figures should show a continuing movement away from deflation. While falling oil prices are being passed through to lower fuel prices at the pump, fuel price deflation will continue to ease due to larger falls a year ago. … …
After contracting in the first three quarters of 2015, the UK manufacturing sector just managed to pull out of recession in the fourth quarter. But overall production experienced its worst quarter for three years. … Industrial Production …
10th February 2016
Over the past few weeks, markets appear to have pushed back their expectation for the timing of the first hike in UK interest rates all the way to Q3 2019, and there has been some speculation of a rate cut in the near term. This stands in contrast with …
9th February 2016
December’s trade figures provide further evidence that the UK’s economic recovery remained reliant on the domestic services sector in Q4 2015. While we think fears of a sharp global slowdown are overdone, progress in reducing the trade deficit is likely …
Following a fairly disappointing Christmas period, January’s BRC sales figures suggested that consumers started the year on a strong footing. But with temporary props set to fade, spending growth in 2016 is unlikely to be spectacular. … BRC Retail Sales …
