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The Tories’ outright majority indicates that the economy is clearly heading for a major re-intensification of the fiscal squeeze next year. This will represent only the first step towards their ambitious plans to eliminate the overall deficit – which …
8th May 2015
With the Conservatives achieving an overall majority in the general election, we now know that consumers are set to face another five years of harsh austerity. But on the whole, households look better placed to deal with it than they did at the start of …
Although all eyes this morning have been on the general election result, March’s trade figures have also been released and help to explain some of the slowdown in GDP growth in the first quarter. … Trade …
With the Conservatives on course to achieve an overall majority, the UK general election result is a surprisingly market-friendly outcome and removes the risk that the economy suffers a prolonged period of political uncertainty. Meanwhile, the gilt market …
The recent softness of retail sales suggests that consumers are saving their windfall from lower energy prices. However, there are still good reasons to think that the money will end up being spent. … Why aren’t consumers spending their extra …
7th May 2015
Although gilt yields have risen over the last few weeks, this seems to have reflected easing fears of deflation, not growing concerns about the outcome of the general election. So with little political risk priced in, gilt yields look vulnerable to rise …
Although GDP posted its smallest quarterly rise since 2012 in the first quarter of this year, we doubt that the economy is on the cusp of a renewed slowdown. The business surveys suggest that Q1’s 0.3% rise will be revised up and/or that quarterly growth …
6th May 2015
Our Election Preview , published 30th April, contains our detailed analysis on the election. Here we answer questions clients may have about the possible series of events over the coming days and weeks. … Post-election negotiations unlikely to redraw …
April’s Markit/CIPS report on services should allay fears of a renewed slowdown in the economy following the deterioration in the manufacturing and construction surveys already released. That said, the recovery is clearly not very well balanced across …
We doubt that the Monetary Policy Committee would want to change monetary policy so close to a general election, especially when a new government might not even have been formed by the time of this month’s meeting. But the election aside, there is still …
5th May 2015
With a hung parliament appearing overwhelming likely, Thursday’s general election looks set to be followed by days, if not weeks, of political horse-trading, and whatever government is finally formed is likely to be less stable than the last. Nonetheless, …
1st May 2015
March’s household borrowing figures showed that consumers’ appetite for credit is increasing. But strong rises in real incomes this year should ensure that a pick-up in credit growth is sustainable. … Household Borrowing Monitor …
The combination of the deterioration of the Markit/CIPS report on manufacturing but improvement in the lending figures highlighted that the economic recovery has become increasingly dependent on consumers. … Markit/CIPS Report on Manuf. (Apr.) & Money …
The latest consumer confidence figures provided another reason to think that Q1’s slowdown in economic growth will prove short lived. Indeed, with real incomes growing strongly, we expect household spending to pick up pace later this year. … GfK/NOP …
30th April 2015
According to the latest CBI Distributive Trades Survey, weak food sales pulled down overall retail sales growth in April. However, high levels of consumer confidence, strong jobs growth and rising real incomes point to retail sales performing well over …
29th April 2015
With the general election just days away, the news that the economic recovery slowed sharply in the first quarter clearly won’t help the coalition parties. However, we expect the slowdown to be only temporary. … Preliminary estimate of GDP …
28th April 2015
The latest CBI Industrial Trends Survey provided some reasons to be optimistic that the sector’s poor performance in the first quarter does not herald the beginning of a prolonged period of weakness. … CBI Industrial Trends Survey (Apr. & …
27th April 2015
Although all eyes are on the general election due to take place in less than a fortnight, developments across the Channel have the potential to be just as important an influence on the UK economy in the coming weeks. Fortunately, the UK is better placed …
24th April 2015
GDP growth has been weak during the term of several governments which had only small majorities. But we would not conclude from this that the fragile government that this general election may yield will condemn the economy to a period of sub-par growth. …
With two weeks until May’s general election, the polls still show that no party is likely to win an overall majority and the composition of the next government is unclear. Despite this ongoing uncertainty, consumer confidence has remained buoyant. This …
23rd April 2015
The last public finances figures before the general election brought some good news for the incumbent coalition. However, weak retail sales figures for March increase the chances that next Tuesday’s preliminary Q1 GDP figure shows a slowdown in economic …
On the whole, the consensus view in the markets still appears to be that the result of the general election will not have major consequences for UK asset prices. If markets had become concerned, then one would expect to have seen sterling weaken and gilt …
22nd April 2015
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 …
The minutes of April’s MPC meeting showed that the Committee has become slightly less concerned by the downside risks to the inflation outlook. But with inflation set to hover near zero for another six months, Bank Rate still look unlikely to rise this …
Recent UK general elections have barely affected markets and this one has yet to have a material impact too. Nonetheless, we could still see a big movement in asset prices in this election’s wake. … Election set to have bigger market impact than …
21st April 2015
The fiscal rules proposed by the Conservative and Labour parties in their manifestos last week suggested that the latter could borrow an extra £130bn more than the Tories over the next five years if in power. Using the pre-financial crisis rule of thumb …
17th April 2015
The UK’s employment miracle shows no signs of drawing to a close. And with some slack still left in the labour market and pay growth not yet threatening the 2% inflation target, the MPC remains under little pressure to cool the economy. … Labour market …
The political parties’ manifestos have confirmed that the scale of the fiscal squeeze could be very different depending on which of them is in power. But there are various factors that will probably mean that the squeezes that the parties would end up …
15th April 2015
UK inflation held at zero in March, but it could yet dip into negative territory at some point in the coming months. But regardless of whether inflation turns negative or not, the big picture is that a period of low inflation should help the economic …
14th April 2015
Whilst the latest BRC Retail Sales Monitor was distorted somewhat by the early timing of Easter this year, it still offered encouraging signs that deflationary pressures on the high street are not causing consumers to defer their spending. … BRC Retail …
The last few weeks have seen mixed messages on the health of the economic recovery, with the upbeat tone of the business surveys contrasting with initial official estimates of output in the first two months of 2015. Although the surveys certainly have …
10th April 2015
Tuesday’s inflation figures could well show that the UK entered deflation last month. But the fact that this mainly reflects lower energy prices makes it a good thing for the economy and there is no evidence yet that a more damaging, long-lasting period …
While February’s official industrial and construction figures suggest that GDP growth in Q1 may be disappointingly weak, we doubt that they signal that the economic recovery is now a busted flush. … Industrial Production & Construction Output …
The MPC left policy unchanged this month against a backdrop of looming deflation. The recent rise in the pound, weakening in the inflation outlook, softer US news and sharper planned government spending cuts suggest that interest rates will rise even more …
9th April 2015
February’s trade deficit came in worse than expected and will re-ignite fears that the strong pound and weakness in demand in the euro-zone is acting as a straightjacket on exporters. However, there are still some reasons to be optimistic. … Trade …
March’s UK Markit/CIPS report on services provided further reassurance that the economic recovery is still on a fast track despite the uncertainty created by the upcoming general election. … CIPS/Markit Report on Services …
8th April 2015
For a country that has spent most of its recent history enduring high inflation, the recent release of figures showing that CPI inflation in the UK has now fallen to zero was a watershed moment. What’s more, it looks odds on that March’s figures will show …
7th April 2015
Last week’s National Accounts showed that the economic recovery had plenty of wind in its sails in the fourth quarter. However, there remains one cloud hanging over the recovery which has yet to be blown away; namely, the current account deficit. Whilst …
3rd April 2015
We think that the deflation likely to be seen in the coming months will of the “good” sort, lasting only a short while and boosting households’ spending power. So we doubt that a rate cut – as floated by MPC member Andy Haldane – will be seen. That said, …
March’s UK CIPS/Markit report on manufacturing added to recent survey evidence suggesting that the sector’s recovery is picking up pace. … Markit/CIPS Report on Manuf. (Mar.) & Productivity …
2nd April 2015
The latest figures on households’ finances provided some further encouraging evidence that the consumer recovery rests on solid foundations. With real incomes set to rise robustly this year, and consumer confidence high, we can expect another strong year …
1st April 2015
The latest set of national accounts leave the economic recovery at the end of last year looking a bit stronger than before. We expect growth to remain robust this year, although the large current account deficit continues to cast a cloud over the UK’s …
The rise in the GfK /NOP composite index of consumer confidence to a 12-year high in March adds to other signs suggesting that households are poised to spend their windfall from lower energy prices. … GfK/NOP Consumer Confidence …
February’s household borrowing figures provided further confirmation that strong consumer spending is not the result of a borrowing binge. … Household Borrowing Monitor …
31st March 2015
The latest money and credit figures provided further evidence that the economic recovery is not fuelling an unsustainable pick-up in credit. … Monetary Indicators Monitor …
For a country that has spent much of its recent history battling high inflation, last week’s data showing that inflation hit zero in February was something of a watershed moment. However, we don’t think that this bolsters the case for an interest rate …
27th March 2015
The trend in retail sales growth still looks healthy and there are reasons to be optimistic that consumer spending will remain strong. Most importantly, inflation has fallen sharply and is now on the cusp of becoming deflation. Given that this is being …
26th March 2015
February’s retail sales figures suggested that the recovery in spending has got back on track, after a weak start to the year. What’s more, the prospects for the rest of the year remain bright. … Retail Sales …
With inflation hitting zero in February, the UK is on the cusp of deflation. But a brief period of gently falling prices driven by lower energy prices is nothing to be feared – in the UK, at least, deflation will be a good thing for the economy. … …
24th March 2015
In a Budget devoid of significant pre-election giveaways or major revisions to the economic forecasts, the most important changes were to the spending plans. While the Chancellor stuck to his overall spending figures for the next few years, he was able to …
20th March 2015
