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Yesterday’s disappointing GDP figures re-ignited concerns about a return to so-called “stagflation” – the toxic combination of high inflation and high unemployment/weak economic growth that plagued the UK during the 1970s and early 1980s. However, we …
26th January 2011
Although heavily affected by the weather, the UK’s shockingly bad Q4 GDP figures - showing a 0.5% quarterly contraction - raise serious concerns over whether the economy is in a strong enough position to withstand the fiscal tightening. … Preliminary GDP …
25th January 2011
Much of the pound’s recent strength appears to have reflected the rise in inflation in the UK and the growing expectation that the Monetary Policy Committee (MPC) will soon be forced to raise official interest rates in response. But sterling’s rise may …
21st January 2011
Abstracting from the effects of the snow, some sort of sluggish recovery in consumer spending still seems to be underway. However, the outlook for this year as a whole remains bleak. … Consumers battle against rising VAT and …
December’s official UK retail sales figures provided further confirmation of the adverse effects of the snow on high street spending last month. Obviously this is just a temporary factor and spending should bounce back this month. Nonetheless, rising …
On the face of it, the latest UK labour market figures provide some tentative signs that the jobs recovery is back on track. But we continue to think that unemployment will rise sharply over the next couple of years as the private sector fails to …
19th January 2011
The recent surge in the oil price to just shy of $100pb will act as yet another brake on the UK’s economic recovery this year just as the fiscal tightening is reaching its most intense phase. … Oil prices another brake on the economic …
18th January 2011
December’s worse than expected UK consumer prices figures will do nothing to ease concerns that the Monetary Policy Committee is neglecting its inflation-targeting remit. But we continue to think that the Committee should ignore such concerns. … UK …
Last week’s decision by the Monetary Policy Committee (MPC) to leave interest rates on hold again will have done nothing to ease concerns that the Committee is allowing a serious inflation problem to develop in the UK. On the face of it, these worries are …
17th January 2011
December’s producer prices figures revealed that cost pressures in the manufacturing sector are continuing to intensify. But this should not prevent consumer price inflation from falling back in the medium term. … UK Producer Prices …
14th January 2011
The Monetary Policy Committee is coming under fire for leaving policy unchanged – as it did again today – in the face of rising near-term price pressures. But we doubt that the Committee has much to gain by raising rates to 0.75% or 1%, while a bigger …
13th January 2011
November’s industrial production figures confirmed that the manufacturing recovery remains in rude health. But the sector’s strong recovery is unlikely to prevent the overall economic recovery from slowing. … UK Industrial Production …
Recent increases in commodity prices and further signs that spare capacity in the UK economy is failing to bear down on inflation have raised expectations that the Monetary Policy Committee (MPC) will raise official interest rates later this year. … …
12th January 2011
November’s UK trade figures are not as bad as the widening in the headline deficits suggests. However, it is clear that net trade is giving at best a limited boost to the wider economic recovery. … UK Trade …
The build-up of near-term price pressures has prompted a widespread re-think of when, and how far, interest rates will start to rise. While a near-term rate hike certainly now looks more possible, we think that it would do little good and, for now at …
11th January 2011
Today’s UK data provided further evidence that economic growth slowed towards the end of last year, although the snow is of course partly to blame. … UK BRC Retail Sales Monitor (Dec.) & BCC Survey …
According to the Halifax, house prices recorded a modest decline in the year to December 2010. With the pressures on house prices still building, we anticipate that prices will fall considerably further into the red this year. … Halifax House Prices …
10th January 2011
Last week’s CIPS/Markit activity surveys seemed to suggest that the economic recovery ground to a complete halt in December. But there are several reasons to think that the recovery is in better shape than these surveys suggest. … Has the recovery really …
If inflation expectations continue to increase, the Monetary Policy Committee (MPC) will no doubt seriously consider a ‘token’ interest rate rise. But for now, it still seems wedded to its view that the slack in the economy will eventually pull inflation …
6th January 2011
December’s CIPS/Markit report on services suggested that the economy ended 2010 on a much weaker note than the recent upbeat industrial data had indicated. What’s more, the Bank of England’s latest Credit Conditions Survey suggested that the impaired …
Perhaps the biggest risk facing the household sector is the possibility of a near-term interest rate rise. We do not think that a modest rate rise would have a disastrous effect on household incomes, although the wider effects of a rate increase could be …
5th January 2011
The economy has entered 2011 on a relatively strong note. However, the recovery looks set to lose momentum as 2011 progresses and the fiscal squeeze hits. We expect growth of just 1.5% both this year and next. … Recovery starts new year with strong …
The early evidence suggests that consumers have been out in force over the Christmas and new year “sales” period, helping to make up for any shopping trips cancelled before Christmas due to the snow. However, a tough year lies ahead for all …
4th January 2011
Broad money growth is still heading in the wrong direction. Bank lending remains weak too, and we continue to expect relatively tight credit conditions to act as a brake on the economic recovery in 2011. … Monetary Indicators Monitor …
Today’s UK data suggested that the economy ended 2010 on a relatively firm note. However, 2011 is set to be a challenging year and we continue to think that the recovery will struggle to maintain the strong growth rates seen recently. … CIPS/Markit Report …
We had been expecting the year to end on something of a high note for the high street, but obviously the snow has dampened these hopes somewhat. That said, people who have spent less than they anticipated on Christmas may just spend more in the “sales” …
23rd December 2010
The raft of UK data released today did little to improve the prospects for the economy next year, highlighting a number of reasons to be concerned over the sustainability of the recovery. … Nat. Accounts, Bal. of Payments (Q3) & MPC mins. …
22nd December 2010
November’s UK public finances figures confirmed that the recent stronger performance of the economy has so far had little positive impact on the dire fiscal position. … Public Finances …
21st December 2010
Last week’s November CPI figures showing inflation rising again to 3.3% has prompted further concerns that the Monetary Policy Committee is in danger of losing its anti-inflation credibility. A year ago, the Committee thought that inflation would …
20th December 2010
Consumer spending could end the year on a relatively strong note. But, we still expect the spending recovery to fade pretty quickly at the start of next year. … A reasonable end to the year in …
16th December 2010
November’s official UK retail sales figures suggested that consumers are still spending relatively freely. But the combination of tax rises, high inflation and public sector job losses make for a pretty nasty backdrop at the start of next year. … Retail …
The recovery in the UK labour market appears to be flagging even before the public sector job cuts have really started. We still expect unemployment to rise fairly sharply over the next couple of years and reach the 3 million mark. … UK Labour Market Data …
15th December 2010
November’s consumer prices figures will have done little to ease concerns over the continued stubbornness of price pressures in the UK economy. … Consumer Prices …
14th December 2010
Last week’s economic data releases brought further encouraging signs that that the long-awaited re-balancing of the UK economy away from consumers and the public sector towards industry and exports is finally underway. … Industrial recovery won't save the …
13th December 2010
November’s producer prices figures suggested that cost pressures in the industrial sector are still pretty strong. … Producer Prices …
10th December 2010
The continued run of positive data on the UK’s economic recovery has led markets to reassess the outlook for monetary policy. Markets now expect official interest rates to rise by around 1% over the next two years – still a modest tightening of monetary …
9th December 2010
With the Monetary Policy Committee (MPC) still sitting firmly on the proverbial fence, this month’s no-change decision is all but certain to be repeated in the next month or two. But we still think that the Committee is over-estimating the ability of the …
October’s UK trade figures add to other recent evidence suggesting that the external sector is finally playing a role in the economic recovery. That said, given the boost from the lower pound, we would probably have hoped to see a rather clearer …
The underlying downward trend in house prices on the Halifax measure accelerated in November. With the debate as to whether house prices are falling settled, the issue now is how severe future falls will be. … Halifax House Prices …
The latest official manufacturing data echoed the recent industrial surveys in suggesting that the recovery in the industrial sector is picking up pace again. But conditions on the high street are looking less rosy. … UK Ind. Production (Oct.) & BRC …
7th December 2010
Christmas appeared to come early for the Chancellor last week. On Monday, the Office for Budget Responsibility (OBR) published its revised economic forecasts, and, broadly speaking, endorsed the Chancellor’s view that the Government’s planned tax rises …
6th December 2010
November’s CIPS/Markit report on services was perhaps a bit disappointing after the recent run of improved news on the economy. The big picture is that the economic recovery is still fragile and fitful – and probably incapable of getting through the …
3rd December 2010
Most members of the Monetary Policy Committee (MPC) are continuing to sit firmly on the proverbial fence. But while a policy change does not look imminent, we still think that the faltering economic recovery will prompt the launch of socalled “QE2” early …
2nd December 2010
With the fiscal squeeze set to kick in soon and the outlook for demand in the UK’s main export markets looking weak, one remaining hope is that stockbuilding could support the recovery next year. In our view, though, any further boost from restocking is …
1st December 2010
The UK economy finally appears to be re-balancing away from consumers and towards the external sector. … Tentative signs of re-balancing …
November’s UK CIPS/Markit report on manufacturing suggested that the industrial recovery is back on track. … CIPS/Markit Report on Manufacturing …
The underlying downward trend in house prices on the Halifax measure accelerated in November. With the debate as to whether house prices are falling settled, the issue now is how severe future falls will be. … Nationwide House Prices …
The recent renewed falls in house prices have revived the long-standing debate about the effect of the housing market on consumer spending. We stand by our long-held view that there is a strong link between housing and spending and expect a second …
The downgrades to the Office for Budget Responsibility’s economic growth forecasts for the next two years are hardly a vote of confidence in the Government’s claim that the economy is capable of withstanding the looming fiscal squeeze. And with the OBR’s …
29th November 2010
