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Tuesday’s inflation figures are likely to show the UK taking another step further towards deflation. And the recent rise in the pound will put additional downward pressure on inflation further ahead. But deflation in the UK is unlikely to last long and …
20th March 2015
While the public finances have finally shown significant improvement in recent months, they have not lessened the need for a major re-intensification of the fiscal squeeze soon after the election. … Public Finances …
Whilst there were a few sweeteners for households in this year’s Budget, the boost to households’ incomes in the near term was meagre. Accordingly, it is strong consumer confidence, rising real wages and a recovering jobs market which will be the main …
19th March 2015
The latest labour market figures were a bit disappointing, but there was enough good news for the Chancellor to trumpet in his Budget later today. Meanwhile, the latest MPC minutes echoed Governor Mark Carney’s comments earlier this week that the rise in …
18th March 2015
This checklist is intended to help clients keep track of the important measures and numbers announced during the Budget at 12.30pm and to provide some instant context. For a more detailed look at our expectations for today’s Budget, please see our UK …
Although sterling has shot up by nearly 5% on a trade-weighted basis since the start of the year, there are several impediments to a further significant appreciation over the coming months. The strength of the US labour market suggests that interest rates …
17th March 2015
Sterling remains vulnerable to concerns about a hung parliament, EU exit and the current account deficit. But it is hard to tell when these concerns will bite, if they will at all. And in the meantime, the immediate prospects for relative interest rates …
13th March 2015
On the face of it, markets appear to be taking the prospect of an inconclusive outcome from May’s general election in their stride. Indeed, markets have moved to price in a slightly faster pace of monetary tightening over the next two years, helping …
12th March 2015
Following the substantial net trade boost to the economic recovery in Q4, January’s trade figures brought more good news on the economy’s rebalancing. But sterling’s recent strength suggests that the deficit is likely to deteriorate again before long. … …
The latest industrial production figures provided further disappointing signs that the sector’s recovery is struggling to re-gain momentum, after almost grinding to a halt in the fourth quarter. But prospects further ahead look a little brighter. … …
11th March 2015
The latest BRC Retail Sales Monitor provided more evidence that the recovery in retail spending has lost some pace at the start of this year, after a stellar fourth quarter. But falling unemployment, rising real wages and strong consumer confidence should …
10th March 2015
We doubt that the recent strength in net migration will be temporary. The recent rise has been primarily driven by increased immigration from Europe, reflecting its weak economy compared to the UK and the end of transitional limits on migrants from …
6th March 2015
The MPC’s decision to stand pat today – marking the 6 th anniversary of interest rates at their record low of 0.5% – looks set to repeated over the next few months while inflation hovers near zero. But by the summer, it should be clear that the UK’s …
5th March 2015
Households are considerably better off than they were just a year or two ago. Indeed, the so-called “misery index” – a sum of the prevailing inflation and unemployment rates – has halved over the last three years and looks set to fall this quarter to its …
4th March 2015
The slight deterioration in the headline activity balance of February’s CIPS/Markit report on services was a bit of a disappointment, but hardly a disaster. The general tone of the survey was actually quite positive, while there is plenty of other …
The latest money and credit figures indicated that the economic recovery is continuing to progress at a robust pace without leading to the rapid accumulation of debt. … Monetary Indicators Monitor …
2nd March 2015
January’s household borrowing figures added to other evidence suggesting that the recovery in housing market activity is starting to re-gain some momentum. … Household Borrowing Monitor …
The latest manufacturing and lending figures brought further encouragement that the economic recovery is regaining pace after late 2014’s soft patch. … Markit/CIPS Report on Manuf. (Feb.) & Mortgage Approvals …
One feature that the recovery has been lacking for a long time is a pick-up in exports. But last week’s GDP figures offered some encouragement that the much-anticipated rebalancing of the economy is finally getting underway. And there are a number of …
27th February 2015
The strong level of the GfK/NOP composite index of consumer confidence in February provides further reassurance that households are likely to spend rather than save the vast bulk of the proceeds from stronger growth in real earnings. … GfK/NOP Consumer …
The Monetary Policy Committee (MPC) voted unanimously to leave interest rates on hold in February and looks set to sit on its hands over the next few months as CPI inflation descends into negative territory. But by the summer, wage data should have …
26th February 2015
While the second estimate of Q4 GDP confirmed that the recovery lost some pace at the tail end of 2014, the new expenditure breakdown showed that the recovery has become better balanced, with net trade finally playing a role in growth. … GDP: Second …
The FTSE 100’s close above its previous all-time high will no doubt be heralded as another milestone in the UK’s economic recovery. But the reality is that the index has underperformed many other overseas indices for some time and is no longer a …
24th February 2015
February’s CBI Distributive Trades Survey makes for somewhat disappointing reading. But with earnings growth picking up and lower energy prices providing a substantial windfall, the recovery in spending should be back on track soon. … CBI Distributive …
23rd February 2015
Although retail sales volumes were a whopping 5.4% higher in January than a year ago, this does not have the hallmarks of an unsustainable boom. The average price of retail purchases has fallen by about 3% over the same period (thanks mainly to lower …
20th February 2015
The latest inflation figures, showing CPI inflation easing to a record low of 0.3% in January, naturally took up most of the column inches last week. It was therefore easy to overlook the latest labour market evidence, which showed that the job market has …
January’s public finance figures are likely to have brought a smile to the Chancellor’s face insofar as they show that the economic recovery is finally having a positive impact on the public purse. Meanwhile, the recovery in spending on the high street …
The minutes of February’s MPC meeting showed that the Committee is more divided about the next move in interest rates than the unanimous vote would suggest. The healthy labour market figures released this morning gave some support to those arguing for …
18th February 2015
CPI inflation reached a record low in January and we think that it is more likely than not that inflation turns negative soon. But with few signs that low inflation is becoming ingrained, the UK’s period of deflation should be of the “good” sort. … …
17th February 2015
With CPI inflation on the verge of turning negative, last week’s Inflation Report saw Bank of England Governor Mark Carney discuss his available policy options should deflation show signs of becoming entrenched. However, the fact that a cut in Bank Rate …
13th February 2015
February’s Bank of England Inflation Report confirmed that deflation is now on the horizon, but that it will be fairly short-lived. Indeed, the stronger medium-term inflation forecast was a warning to financial markets that they may have pushed their …
12th February 2015
Markets have revised their expectations for interest rates significantly, such that they now expect the first rise in Bank Rate to occur in Q1 next year, some four months earlier than they did at the start of this year. There appears to be a couple of …
10th February 2015
The latest BRC Retail Sales Monitor suggests that consumer spending retained a fair degree of momentum at the start of the year. What’s more low energy prices should ensure that spending remains strong over the course of 2015. … BRC Retail Sales Monitor …
Deflation will be the word on everyone’s lips at this week’s Inflation Report press conference. Mr Carney will need to emphasise that the Committee is alert to the risk that deflation becomes ingrained, but is also likely to argue that the period of …
6th February 2015
Whilst December’s trade data are not as bad as they first appear, the strong pound and weak demand from the euro-zone are likely to prevent a material improvement in the external position in 2015. … Trade …
Presumably today’s decision to leave interest rates unchanged was again unanimous after deflation concerns prompted Martin Weale and Ian McCafferty to drop their call for a rate hike last month. An interest rate rise in the immediate future still looks …
5th February 2015
The recent rebound in the oil price does not mean that the UK will necessarily avoid a spell of deflation, although it does increase the chance that the spell is brief and shallow. … Oil price rebound does not eliminate chance of …
With deflation imminent, QE underway in the euro-zone and sterling rising, a case could be made for the MPC to restart its own asset purchase programme. But recent falls in market interest rates mean that the economy is already receiving more monetary …
4th February 2015
While the preliminary estimate of Q4 GDP indicated that the recovery lost pace towards the end of 2014, early 2015 appears to have seen a renewed acceleration. Indeed, monthly indicators of output from the CBI and Markit both picked up in January, while …
January’s Markit/CIPS report on manufacturing provided some encouraging signs that the sharp fall in oil prices since last summer is finally beginning to support the sector’s recovery. … Markit/CIPS Report on Manufacturing …
2nd February 2015
We think that the risks to the public finances and output in the oil and gas sector from lower oil prices are exaggerated. And while investment in the North Sea might suffer, stronger investment in other sectors should offset this over the medium term. … …
While last week’s GDP figures confirmed that the recovery lost momentum at the tail end of 2014, we expect it to regain pace soon. One helpful development in that respect should be an end to the mini-downturn in housing market activity that unfolded over …
30th January 2015
December’s money and credit figures brought some tentative signs that lending flows are finally beginning to strengthen and so are providing some timely support to the economic recovery. … Monetary Indicators Monitor …
December’s household borrowing figures provided some tentative signs that we havenow reached a turning point in housing market activity. And, given the strongeconomic backdrop, household borrowing looks set to gather more pace over 2015. … Household …
The strength of January’s GfK /NOP composite index of consumer confidence suggests that consumers’ spirits have been lifted by their stronger purchasing power, partly as a result of the collapse in the oil price. … GfK/NOP Consumer Confidence …
The chances of interest rates rising soon look even slimmer now that a spell of deflation is on the horizon. However, if we are right in expecting deflation to be brief and of the “good” sort, this does not entirely rule out a rate rise this year. … MPC …
29th January 2015
January’s CBI Distributive Trades Survey indicates that consumers are spending the windfall from lower oil prices and higher earnings and suggests that strong retail sales growth over the festive period did not merely reflect a shift in the timing of …
While the preliminary estimate of Q4 GDP brings further evidence that the UK’s economic recovery lost a little pace towards the end of the last year, the recent sharp fall in oil prices suggests that it should regain some vigour in early 2015. … …
27th January 2015
The consumer recovery looks set for another robust year of growth in 2015. Indeed, there are a number of factors which could mean that spending growth accelerates. For a start, the halving in the oil price since last summer is beginning to provide a …
23rd January 2015
Anything that kick-starts the UK’s biggest trading partner clearly has the potential to be good news this side of the Channel too. That said, the main channel through which we think QE will work in the euro-zone is by pushing down the euro, which could …
