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Despite the revival in the housing market and the role of consumer spending in driving the rebound in the economy, the economic recovery continues to remain a relatively creditless one. But this should not act as too much of a barrier to consumers’ …
29th October 2013
On close inspection, the recent rises in inflation expectations among households and in the gilt market appear to be nothing to worry about. The risk that the Monetary Policy Committee (MPC) abandons its forward guidance because of spiralling inflation …
28th October 2013
October's CBI Distributive Trades Survey results surprised on the downside, with sales growth at its lowest since June. But there are good reasons to think this was probably just a one-off and that retail sales should continue to grow at a decent rate. …
With last week’s GDP figures providing further evidence that the economic recovery is becoming entrenched, the recovery should be able to withstand the looming round of energy price hikes. Indeed, other recent commodity price movements have actually …
The preliminary estimate of Q3 GDP confirmed that the UK economy is currently enjoying a period of healthy and well-balanced growth. Meanwhile, Mark Carney announced last night in a speech reforms to the Bank’s liquidity provisions. … Preliminary GDP …
25th October 2013
The CBI’s Industrial Trends Survey for October and the fourth quarter provided reassurance that the manufacturing recovery has not been knocked off course by sterling’s recent appreciation or the disruption from the US debt ceiling debacle. … CBI …
24th October 2013
October’s MPC minutes yielded little for Bank of England watchers, with the Committee unanimously in favour of keeping policy unchanged. While unemployment is falling a little faster than the Committee expected, the scope for productivity to recover means …
23rd October 2013
Although the economic recovery has taken its time to come though in the fiscal numbers, September’s public finances data suggested that the Exchequer is now reaping the rewards of a stronger economy. The Chancellor can look forward to delivering some good …
22nd October 2013
Given the latest round of utility price rises and a further slowdown in pay growth, it might seem that the squeeze on household incomes is never going to end. However, we remain optimistic that real pay should finally start to rise again in the middle of …
21st October 2013
Although real earnings are still being squeezed hard, one positive factor for households is that the pace of the Government's fiscal tightening is easing a bit ahead of 2015's general election. But austerity is still exerting some drag on consumer …
Last week's deal on the US shutdown took the unlikely, but potentially catastrophic, possibility of a US sovereign default off the table. Admittedly, a series of potential US fiscal flashpoints still lie ahead. But there are good reasons to think they …
The consumer recovery remains on track. Consumer confidence is still rising and the housing market will receive a fillip from the second stage of the Help to Buy Scheme. Admittedly, it will be a while before real pay starts to rise again, especially with …
18th October 2013
September’s rise in retail sales volumes puts the consumer recovery back on track. While pressure on real earnings points to further growth being unspectacular, rising wealth and the boost to consumer sentiment from good news about the economy means that …
17th October 2013
The claimant count measure of unemployment has been falling more sharply than the wider ILO measure used by the MPC in its forward guidance on interest rates. While the claimant count is a timelier measure, we do not think that it necessarily heralds an …
16th October 2013
Fears that the impasse in the US debt ceiling negotiations could lead to default by the US Treasury have prompted investors to anticipate a later tightening of UK monetary policy, equity prices to fall and the pound to strengthen. Gilt yields also stand …
The latest labour market figures supported the MPC’s (and our own) view that even a fairly robust economic recovery will bring unemployment down only slowly. … Labour Market Data …
While a touch disappointing, September's inflation figures were not a material blow to hopes that it will fall back to its target. And we still doubt that the inflation knockouts that underpin the MPC's forward guidance are at risk of being breached. … …
15th October 2013
The Government's Help to Buy (HTB) Scheme has been criticised for stoking a potential house price bubble and exposing the taxpayer to unwarranted risks. A more overlooked danger arises from the impediment HTB may present to a recovery in business …
We think that this Wednesday’s labour market figures will show that the unemployment rate held steady in August, which could prompt markets to push back further their expected timing of the first rise in Bank Rate. Even if the unemployment rate does edge …
14th October 2013
Last week’s lacklustre official figures for trade, industrial production and construction output in August cast more doubt on whether the recovery is likely to be quite as robust and as broad-based as many of the activity surveys have indicated. …
With interest rate expectations dropping back a bit over the last month and the recovery continuing apace, today’s decision by the Monetary Policy Committee (MPC) to leave policy unchanged was predictable. And, barring unexpected shocks, a dearth of …
10th October 2013
Next week’s inflation figures look set to confirm that retailers will be burdened with another fairly hefty rise in business rates in April. While pressure is growing on the coalition to support retailers, immediate relief looks unlikely. Nonetheless, …
August’s weak industrial production and trade figures signal that GDP growth in the third quarter might not be quite as strong as the business surveys have suggested. Meanwhile, the latest Credit Conditions Survey indicates that banks are not planning to …
9th October 2013
While September saw the BRC’s measure of retail sales growth slow, that month’s warm weather explains part of the weakness. And other indicators have been more positive. Nonetheless, the consumer recovery continues to rest on fragile foundations. … BRC …
8th October 2013
Following a disappointing initial reaction to forward guidance, there could have been a case for the MPC to do more to support the recovery. But with expectations for the date of a rate rise having receded and the recovery going strong, that seems less …
Today we are publishing our latest UK Quarterly Review, in which we are revising up our growth forecasts. Stronger growth should not stop inflation falling back to target. It won’t prevent unemployment from coming down only slowly either. Accordingly, we …
7th October 2013
In an attempt to reinforce the Conservatives’ image of fiscal responsibility, Mr Osborne said last week that his party would return the overall public finances to surplus by 2020. This would require an additional £25bn of tightening – equivalent to …
The economic recovery is becoming more entrenched, with GDP confirmed as having grown by 0.7% in Q2 and expansion evident across all three main sectors of the economy. Meanwhile, sentiment has risen to levels not seen since the late 1990s. And although …
3rd October 2013
The CIPS business surveys continue to point to a sharp pick-up in GDP growth in the third quarter. Admittedly, they are the most upbeat of all the economic indicators at the moment. Nonetheless, GDP growth in the third quarter should have comfortably …
While September’s CIPS manufacturing survey softened slightly, the survey still points to a sector recovering at a rapid clip. However, with export growth weak relative to domestic demand and cost pressures persisting, some concerns remain about the …
1st October 2013
While tomorrow’s rise in the national minimum wage (NMW) is small, proposals to increase it significantly more in the future threaten to add to the pressure on retailers’ profit margins. But even if the proposed reforms go ahead, the overall outlook for …
30th September 2013
While the pick-up in certain measures of broad money is another encouraging sign that the economy has turned a corner, the continued weakness of bank lending could prevent the economic recovery from gathering much more pace in the near term. … Monetary …
Growth in household credit continues to show no sign of breaking away from the subdued rates seen since 2008, with any nascent ‘bubble’ in the housing market not yet apparent in the borrowing data. But with sentiment rising and the second stage of ‘Help …
With last week’s National Accounts showing a steep fall in business investment in Q2 and the current account deficit widening to a record high in the first quarter of this year, hopes for a rebalancing in the economy towards investment and exports are, on …
Consumer confidence in September rose to its highest level since October 2007. With real incomes still falling, it is too early to be sure that this will lead to sustained growth in household spending. But it does provide further hope that spending will …
27th September 2013
Today’s news on the state of households’ finances shows that incomes and saving recovered from the dips seen in Q1. With the financial position of households looking more sustainable, modest growth in consumer spending should continue. … Q2 sees …
26th September 2013
The final estimate of Q2 GDP left the quarterly rise unrevised at a decent 0.7% and timelier economic data suggest that the recovery has gained more momentum since. However, the news that the current account deficit reached a massive 5.5% of GDP at the …
The further strengthening of the CBI Distributive Trades Survey in September provides reassurance that August’s drop in the official measure of retail sales was just a blip. For now, rising consumer confidence and employment seem to be offsetting the …
25th September 2013
Today’s statement by the Bank of England’s Financial Policy Committee (FPC) lacked drama. While the Committee is keeping a close eye on developments in the housing market, the approach for now is words rather than action. In any case, with house prices …
Mark Carney’s forward guidance has been unsuccessful in convincing the markets that the Bank Rate is likely to remain on hold until 2016. Speeches from other MPC members in the last two days, indicating that a range of views exist within the MPC regarding …
24th September 2013
With recent data showing no sign of a pick-up in workers’ pay, the economic recovery looks promising for UK firms’ profits. But it is questionable quite how much this will aid in rebalancing the economy towards investment. … Will a rising profit share …
With UK gilt yields unhelpfully following US Treasury yields up in recent months, it was welcome that they followed them down last week. Admittedly, with the prospect of more QE receding and the recovery still strengthening, a further significant fall in …
23rd September 2013
While the summer’s prolonged hot spell may have distorted sales patterns, the underlying trend in consumer spending still looks quite positive. … Consumer recovery still looking …
20th September 2013
Following a run of disappointing monthly public sector borrowing numbers, August’s public finances data suggested that the economic recovery could be finally starting to make its presence felt in the fiscal numbers. … Public finances …
August’s fall in retail sales volumes may well reflect the impact of the summer’s prolonged warm spell, rather than any underlying weakness in shoppers’ desire to spend. That said, the first monthly fall in sales volumes since April could temper …
19th September 2013
September’s MPC minutes suggest that, despite the arguably disappointing impact of forward guidance, the Committee is happy with its policy stance. A resumption of quantitative easing (QE) before the end of the year now looks less likely, although we …
18th September 2013
Relatively strong growth in the workforce is one factor that should prevent the unemployment rate from falling quickly towards the Bank of England’s 7% threshold. An influx of workers from Romania and Bulgaria should support this growth, allowing interest …
August’s fall in CPI inflation marks another step towards the 2% rate we think it could reach early next year. An end to the squeeze on households’ real earnings remains in sight. … Consumer Prices & Producer Prices (Aug.) & Lloyds …
17th September 2013
Although there are worries that the Government’s housing schemes will push up house prices rather than activity, housebuilding has picked up and we expect it to give further support to the recovery. … Housebuilding should continue to support the …
16th September 2013
Last week’s numerous stories about estate agents dominating the jobs market were probably a bit over the top. In fact, the rise in both manufacturing and construction employment in the first two quarters of the year strengthened our view that the economic …
