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The UK labour market is starting to benefit from the recovery in the wider economy. But we still doubt that private sector hiring will be able to offset the sheer scale of the looming public sector job cuts. … UK Labour Data …
14th July 2010
The further fall in headline inflation in June suggests that there is still little pressing need for an interest rate rise. But with core price pressures remaining stubborn, inflation nerves will remain for a while yet. … UK Consumer Prices …
13th July 2010
Data released last week supported the view that, while the economy probably grew at a solid pace in the second quarter, that may be as good as it gets as far as the pace of the UK economic recovery is concerned. … As good as it …
12th July 2010
Q1’s national accounts highlighted the fragility of the recovery seen so far. We still doubt that the economy is in good enough shape to withstand the fiscal squeeze that is about to start in earnest. … National Accounts & Balance of Payments …
May’s trade figures continued the recent run of disappointing news on the UK recovery. But at least price pressures in the industrial sector appear to be easing. … UK Trade …
9th July 2010
Today’s no-change decision confirms that the majority of the Monetary Policy Committee (MPC) still sees no pressing need to tighten monetary policy. With the biggest fiscal squeeze in decades getting underway, we think that the economy needs all the …
8th July 2010
May’s UK industrial production figures added to recent tentative evidence that the pace of economic recovery may have peaked in the second quarter. … UK Industrial Production …
Already we’re starting to get a feel for just how nasty the effects of the looming cuts in government spending will be. The OBR last week revealed that it expects over 600,000 public sector job cuts over the next five years (compared to our own estimate …
5th July 2010
June’s UK CIPS/Markit report on services provided further evidence that the recovery in the largest sector of the economy has lost momentum since the start of the year. … CIPS/Markit Report on Services …
The £40bn of additional fiscal tightening announced in June’s emergency Budget takes the total tightening to some £128bn by 2015/16, the equivalent of some 8% of GDP. (See Chart.) With the private sector unlikely to compensate fully, we continue to think …
1st July 2010
June’s UK CIPS/Markit report on manufacturing confirms that the recovery in the industrial sector remains robust. But with export orders stalling and credit conditions still tight, the prospects for the broader economy are far less encouraging. … …
The Monetary Policy Committee (MPC) is getting increasingly nervous about the current rise in inflation, as evidenced by Andrew Sentance’s vote for an interest rate rise last month. However, most members still seem prepared to wait and see if the spare …
After outstripping income growth for over a year now, house price gains more or less stalled in June. The impact of the fiscal squeeze on incomes and confidence is likely to drive house prices back down again over the next 18 months. … Nationwide House …
30th June 2010
House prices rose in July, reversing some of the recent falls. But this does not alter our view that prices are set for a period of considerable weakness in the remainder of this year and into 2011. … Nationwide House Prices …
Growth of the Monetary Policy Committee’s favoured measure of the money supply has continued to pick up pace, but we doubt that this means that a strong pick-up in money spending is soon to come. … Monetary Indicators Monitor …
29th June 2010
The latest mortgage lending numbers from the Bank of England were little changed from last month, indicating a lending market that remains very subdued. … Mortgage Lending …
Last week’s tougher than expected Budget has helped to ease market concerns about the UK’s fiscal outlook, but it won’t eliminate them altogether. For a start, the vast bulk of the planned fiscal squeeze will come in the form of spending cuts which will …
28th June 2010
Given that the Bank of England has been criticised for not shouting loudly enough about the risks of a banking crisis, the gloomy tone of its latest Financial Stability Report (FSR) is perhaps unsurprising. That said, we agree with its message that the …
25th June 2010
The minutes of June’s Monetary Policy Committee (MPC) meeting showed that a divide is starting to open up about the risks to the inflation outlook. But most members still seem to believe that the slack in the economy will bring inflation down from its …
23rd June 2010
Fears that a rise in capital gains tax would rapidly destabilise the fragile house price recovery appear to have been overdone. But the scale of the fiscal squeeze announced by the Chancellor today was, if anything, tougher than had been anticipated. And …
22nd June 2010
This checklist is intended to help clients keep track of the important measures and numbers announced during the Chancellor’s Budget speech at 12.30pm and to provide some instant context. … UK Budget …
Last week’s interim forecasts from the Office for Budget Responsibility (OBR) sprung something of a surprise in revealing a lower projected path for public borrowing over the next five years than that presented by Alistair Darling back in March. … The …
21st June 2010
May’s public finance figures continued the recent run of slightly better than expected news on the fiscal position. But the big picture is still that a major fiscal squeeze looms, with tough measures set to be announced in Tuesday’s Budget. … Public …
18th June 2010
There is clearly a strong chance that Tuesday’s emergency Budget contains a rise in VAT. While this might make the MPC’s job a bit trickier, we doubt that it would push the Committee into raising interest rates prematurely – especially given the adverse …
17th June 2010
Although the latest news has been mixed, consumer spending on the whole appears to be holding up well. But there are other signs that cracks in the recovery are appearing, including recent falls in consumer confidence and borrowing. With the emergency …
May’s official retail sales figures suggested that high street spending has not weakened as much as the recent retail surveys have suggested. Nonetheless, it is hard to see spending on any measure holding up once the fiscal squeeze starts. … UK Retail …
Since our last Markets Analyst, there have been growing signs that the global economic recovery, and the UK’s recovery in particular, is built on fragile foundations that will buckle under the weight of the upcoming fiscal squeeze. If the UK’s recovery …
16th June 2010
The UK labour market is showing tentative signs of improvement, but still looks too fragile to withstand the looming public sector job cuts. … UK Labour Data …
May’s UK consumer prices figures provided some reassurance that the MPC will be able to avoid the nightmare scenario of having to raise interest rates just as an enormous fiscal squeeze hits the economy. … UK Consumer Prices …
15th June 2010
The lower path of public borrowing projected by the Office for Budget Responsibility might seem to relieve some of the pressure for an additional fiscal tightening in next week’s Budget. But we don’t yet know quite what the new Government’s fiscal …
14th June 2010
This week’s pronouncements by the newly created Office for Budget Responsibility (OBR) could set a gloomy backdrop for the emergency Budget due in just over a week’s time. For a start, the OBR is likely to revise down the GDP growth forecasts used in the …
Today’s UK data contained mixed news on the inflation outlook, with easing cost pressures contrasting with rising inflation expectations. We still place little weight on inflation expectations as an indicator of future inflation and continue to think that …
11th June 2010
10th June 2010
April’s trade figures suggested that the external sector is still in no position to offset the effects of the fiscal squeeze that is now almost upon us. … UK Trade …
9th June 2010
The Canadian experience of the mid-1990s has been taken by many as evidence that the UK’s large government deficit can be brought under control fairly easily and without undermining the broader economy. However, a closer look is less reassuring. … UK …
8th June 2010
Cracks already seem to be appearing in the recovery on the services side of the economy. Admittedly, overall GDP growth in the second quarter could still prove to be fairly reasonable, in part due to the more robust recovery in the industrial sector. But …
7th June 2010
The further rise in CPI inflation in April – which triggered another letter from the Governor to the Chancellor – prompted claims that the MPC is being too sanguine about the inflation outlook. But we still think that the MPC is right to expect inflation …
4th June 2010
The contradictory messages offered by the Halifax and Nationwide house price data make it almost impossible to draw clear conclusions about the health of the market. But, at the very least, May’s drop in the Halifax index highlights the fragility of the …
The contradictory messages offered by the Halifax and Nationwide house pric data make it almost impossible to draw clear conclusions about the health of the market. But, at the very least, May’s drop in the Halifax index highlights the fragility of the …
