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The threat to the UK from the euro-zone has continued to intensify, with concerns building about the Spanish banking system in recent days. But the UK has so far retained its safe-haven status, with the pound climbing higher and ten year government bond …
6th June 2012
The Queen’s Diamond Jubilee celebrations from 2nd to 5th June offer some escape from the recent bad news, and may boost consumer spirits and spending. But the additional bank holiday is likely to weigh heavily on output in June, albeit with the potential …
4th June 2012
The euro-zone debt crisis has already had a significant impact on UK markets. Even so, we doubt that markets have fully priced in the likely economic effects that would stem from the partial breakup of the euro-zone that we anticipate will occur this …
1st June 2012
The sharp deterioration in May’s CIPS report on manufacturing suggests that the downturn in the industrial sector has intensified and has increased the pressure on the Monetary Policy Committee (MPC) to announce further asset purchases as soon as next …
The minutes of May’s meeting showed that the decision to pause quantitative easing (QE) was pretty close. And the news since then has strengthened the case for doing more. Our hunch is that the Committee will take more action this month. But even if it …
Today’s data from the Nationwide show that house prices continue to tread water. In terms of the outlook, however, downside risks, such as further falls in GDP, dominate the upside. We continue to expect weaker house price data in the second half of the …
31st May 2012
The surprise pick-up in the GfK measure of consumer confidence in May is consistent with the positive findings from the recent CBI Distributive Trades Survey. The Nationwide house price index released this morning also showed a small rise. But the …
April’s household borrowing figures painted a weak picture, suggesting that lending growth is still too weak to foster a sustainable recovery in consumer spending. … Household Borrowing Monitor …
30th May 2012
With money growth still very weak, we continue to think that another extension of quantitative easing is very close. … Monetary Indicators Monitor …
The Bank of England measure of mortgage approvals for April does nothing to change the picture of a depressed mortgage market. With escalating tensions in the euro-zone likely to curb further the appetites of both borrowers and lenders, it is hard to see …
May’s CBI Distributive Trades Survey suggested that demand on the high street has picked up quite strongly in May, perhaps reflecting a rebound from April’s disappointing, weather driven, results. However, we still expect the consumer recovery to struggle …
29th May 2012
Last week’s figures brought some relief on the inflation front, with core inflation dropping from 2.5% to 2.1%. We would not declare victory over inflation just yet. Nonetheless, with pay growth so low, we continue to expect core inflation to drop to very …
28th May 2012
After a seemingly strong spell around the turn of the year, the recovery in consumer spending is flagging again. Total real spending grew by just 0.1% in the first quarter, as a rise in retail sales was offset by a drop in spending off the high street. …
24th May 2012
Initial hopes that the drop in GDP in Q1 might be revised away have been quickly disappointed, with the 0.2% fall today revised to a bigger 0.3% drop. The figure could yet be revised back up in the future. But given the various factors constraining the …
Although a Greek exit from the euro-zone might indirectly tarnish gilts’ safe-haven status, the economic disruption that it would cause would probably apply additional downward pressure on gilt yields. Furthermore, the prospect of more QE and a bigger …
23rd May 2012
The relatively dovish tone of the minutes of May’s MPC meeting suggested that the door to more quantitative easing (QE) is still open. We continue to expect the asset purchases to be resumed soon. … MPC Minutes (May) & Retail Sales …
Inflation resumed its downward trend in April. The fall gives the MPC a bit more leeway to undertake further quantitative easing to cushion the UK economy from the turmoil in the euro-zone. … Consumer Prices & Public Finances …
22nd May 2012
Mervyn King characterised 2012 as a “zigzag year”. Output will certainly bounce around over the next few quarters, but we expect the underlying trend to be flat to slightly down. … Zigzag year to mask weak underlying …
21st May 2012
The recent fall in household wealth highlights one key way in which consumers are already suffering from the impact of the Greek debt crisis. A sustained recovery in real household spending continues to look unlikely while the euro-zone crisis is …
Differences in foreclosure procedures will be one determinant of when State-level housing markets improve. While the national housing market is in the early stages of a recovery, many of the judicial foreclosure States which are struggling to clear their …
According to the latest figures, differences in regional economic growth rates have begun to narrow. Meanwhile, there are signs that London’s economic recovery is starting to be undermined by emerging weaknesses in the labour and housing markets. … …
16th May 2012
May’s Bank of England Inflation Report struck a gloomy tone, suggesting that sticky inflation is preventing the MPC from doing anything to offset the deterioration in the growth outlook. However, we still expect more quantitative easing later this year, …
Labour market activity is still holding up surprisingly well. But pay growth remains exceptionally weak and we expect the return to recession to weigh on the jobs figures before long. … Labour Market Data …
The recent fall in oil prices should, if maintained, bring petrol prices down by enough to boost consumers’ annual disposable incomes by about 0.2%. However, this will not be enough to stop real pay from continuing to fall throughout the rest of this …
15th May 2012
March’s trade figures showed some improvement, although the external sector still looks likely to have dragged on GDP growth in the first quarter overall. … Trade …
The UK has few direct exposures to Greece. However, if Greece defaults on its debt, and perhaps leaves the euro-zone, the UK would still stand to suffer indirectly from the fallout. … What would a Grexit mean for the …
The inflation profile in Wednesday's Inflation Report probably won’t look much different from February’s Report. This would appear to support the consensus expectation that the QE programme is now as big as it is going to get. But with the MPC’s growth …
14th May 2012
April’s producer price figures indicated that firms are passing on a bigger than expected proportion of past increases in their costs to customers. But with the latest construction figures suggesting that the economy is even weaker than previously …
11th May 2012
Long-run UK government bond yields have fallen to their lowest levels since records began in 1703 due to a further increase in global demand for safe-haven assets. This increase in demand has more than offset any adverse impact on gilt yields from the …
Today’s decision by the Monetary Policy Committee (MPC) to pause its programme of asset purchases shows that the Committee is putting greater weight on the recent stickiness of inflation than the poor activity news. But if we are right in expecting …
10th May 2012
March’s official industrial figures confirmed that the underlying trend in production is still down and did not support the view that GDP growth in the first quarter is likely to be revised up. … Industrial Production …
Results from the latest BRC survey accord with other evidence that the recent strength of high street spending is fading. … BRC Retail Sales Monitor …
9th May 2012
The recent weakness of the activity data has made this week’s Monetary Policy Committee (MPC) decision much trickier than looked to be the case a few weeks ago. On balance, we think that the Committee will put more weight on the sticky inflation figures …
8th May 2012
Last week’s weak bank lending figures, as well as the softer business surveys for April, have intensified the dilemma facing the MPC ahead of its policy decision on Thursday. For now, we think that the MPC will put more weight on the sticky inflation …
7th May 2012
April’s slump in the Halifax house price index must be taken with a large pinch of salt. The underlying trend in house prices is soft, and will almost certainly soften further. But, for now, it is nothing like as weak as last month’s sharp drop in prices …
4th May 2012
The UK returned to recession in Q1, making this the weakest peacetime recovery in a century. Reasonably positive activity surveys for the first quarter raise some doubts about the ONS’s Q1 estimate, but more recent survey evidence from April has …
3rd May 2012
April’s CIPS/Markit report on services echoed the other surveys released this week in suggesting that the second quarter has got off to a soft start. … CIPS/Markit Report on Services …
The underlying trend in house prices has softened notably in the past five months. That seems consistent with reports that mortgage credit conditions are tightening and that the economy is now back in recession. … Nationwide House Prices …
Overall broad money growth remains extraordinarily weak. The MPC’s preferred measure of M4 is stronger, but the monetary indicators as a whole point to the need for further quantitative easing. … Monetary Indicators Monitor …
2nd May 2012
The post-stamp duty holiday downturn in mortgage approvals for new house purchase may have come to an end in March. But we are doubtful that mortgage lending will now mount a sustained recovery. … Mortgage Lending …
A bad result for the Government in Thursday’s local elections would suggest that the austerity backlash seen in the euro-zone has spread to the UK. But the coalition still seems set to stick to its fiscal plans. … Is the austerity backlash spreading to …
1st May 2012
The deterioration in April’s CIPS report on manufacturing suggested that the industrial sector has started the second quarter on a weak footing. The rebalancing of the economy towards production and exports seems to be a realistic prospect only in the …
Although there are doubts over the reliability of the Q1 GDP figure, it would take a huge revision to change the woeful nature of this recovery. And regardless of whether the ONS figures are right or not, the headlines have been screaming recession in the …
30th April 2012
The substantial divergence between the preliminary estimate of GDP and the closely-watched CIPS activity surveys has led many to question whether the official figures will be revised stronger in time. However, any upward revision seems likely to be small …
25th April 2012
Just two and a half years after it pulled out of the last one, the UK is already back in a recession. We still think that GDP will contract by 0.5% this year as a whole. … Provisional GDP …
We doubt that economic growth will be as strong as the OBR expects. But even if it is right, it may be too optimistic about the positive impact this will have on the public finances. … Will borrowing respond to the recovery as the OBR …
24th April 2012
March’s public finance figures suggested that the trend in the fiscal position has worsened and have given some reason to doubt that the coalition will be able to bring borrowing down in line with the plans in the new fiscal year. … Public finances …
This week’s preliminary estimate of Q1 GDP will finally answer the question of whether the UK has slipped back into technical recession. It will be a close-run thing as to whether or not the data show the economy contracting again. Our best guess is that …
23rd April 2012
All measures of spending improved in March, albeit partly due to temporary factors. … Consumer spending remains resilient …
20th April 2012
March’s surge in retail sales suggested that consumer spending remains surprisingly resilient and has increased the chances that the overall economy grew in the first quarter. However, we remain concerned about the outlook for consumer spending. … …
