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We will be discussing whether the next government will move the dial on the economy in a 20-minute online briefing at 3pm GMT on Wednesday 13th March. (Register here .) We doubt the big rise in the minimum wage in April will prevent wage growth from …
11th March 2024
Much ink has been spilled on the Spring Budget this week. For our part, we discussed the macroeconomic and financial market implications in our UK Drop-In and in our UK Economics Focus . The main takeaway is that while the Chancellor was desperate to use …
8th March 2024
The net giveaway of £13.9bn (0.5% of GDP) in 2024/25 in the Budget may help end the recession before an election later this year. But fiscal policy is still being tightened in 2024/25 and that tightening will continue after the election and will probably …
6th March 2024
Boost to the economy now comes ahead of a bigger drag after the election The net fiscal giveaway of £13.9bn (0.5% of GDP) in 2024/25 in the Budget may at the margin help lift the economy out of its mild recession before an election later this year. But a …
Our view that the Bank of England will become less concerned by the most persistent part of services CPI inflation suggests that it will cut interest rates in the summer, perhaps in June. But the risk is that non-energy intensive services inflation stays …
4th March 2024
Could there be a tax-cutting Budget bombshell? The rumours this week suggest that the Chancellor may have a bit less to play with in the Budget on Wednesday 6 th March than the £15bn we estimated. As a result, he seems to be considering more revenue …
1st March 2024
This page has been updated with additional analysis since first publication. Drag on consumption from higher interest rates fading January’s money and credit figures suggest the drag on consumer spending and the housing market from higher interest rates …
29th February 2024
A version of this report was originally published as an opinion piece in The Times on 28th February 2024. The government will reportedly unveil an initiative to encourage lenders to offer 99 per cent mortgages in the spring budget. If implemented, it …
28th February 2024
This is an updated checklist which takes into account our latest expectations for the Spring Budget. The checklist helps clients keep track of the key policies and forecasts announced during the Chancellor’s Spring Budget at 12:30pm (GMT) on Wednesday 6 …
The outlook for the UK economy is unlikely to be very different depending on which of the possible combinations of UK Prime Ministers and US Presidents this year’s elections deliver. Even so, there may be some nuances. This Update establishes a framework …
26th February 2024
Disappointing economic and fiscal forecasts from the OBR haven’t prevented the Chancellor, Jeremy Hunt, from unveiling a splash at previous fiscal events. This time last year, he was handed £14.5bn of headroom against his fiscal mandate to ensure the …
23rd February 2024
This page has been updated with additional analysis since first publication. Lingering price pressures may continue to concern the BoE The small rise in the composite activity PMI, from 52.9 in January to 53.3 in February (CE forecast 53.0, consensus …
22nd February 2024
This page has been updated with additional analysis since first publication. Chancellor won’t have huge amounts of cash to splash We will be discussing what the policies announced in the Budget mean for the economy and the financial markets in a 20-minute …
21st February 2024
We will be discussing what the policies announced in the Budget mean for the economy and the financial markets in a 20-minute online briefing shortly after the Budget at 3pm GMT on Wednesday 6 th March. (Register here .) Using most of the fiscal headroom …
20th February 2024
It’s debatable whether the 0.1% q/q and 0.3% q/q contractions in real GDP in Q3 and Q4 2023 should be labelled as a recession given the falls were so small. While it satisfies the usual definition of a recession being two consecutive quarters of falling …
16th February 2024
This page has been updated with additional analysis since first publication. Strong rebound suggests the retail recession will soon be over The 3.4% m/m rebound in retail sales volumes in January suggests the retail recession, and perhaps the economy …
This page has been updated with additional analysis since first publication. In the mildest of mild recessions, but recovery is in sight The news that the UK slipped into technical recession in 2023, will be a blow for the Prime Minister on a day when he …
15th February 2024
Soft surprise supports our view that inflation will fall below 2.0% in April By staying at 4.0% in January rather than rising as widely expected (BoE 4.1%, CE 4.1%, consensus 4.2%), January’s UK CPI inflation figures are better than expected and do not …
14th February 2024
We will be discussing whether the next government will move the dial on the economy in a 20-minute online briefing at 3pm GMT on Wednesday 13th March. (Register here .) The next general election won’t be as pivotal for the economy or the markets as the …
13th February 2024
This page has been updated with additional analysis since first publication. Wage growth easing a bit slower While wage growth fell further in December, evidence that the labour market may not be loosening much suggests wage growth may not fall as fast as …
A lot of data is being released next week and it might not be a good look for the UK economy. The release of January’s CPI inflation figures on Wednesday may reveal a second rise in as many months, from 4.0% in December to 4.1%. Within that, both core and …
9th February 2024
Although the recent transition to a higher interest rate climate has not caused any lasting or systemic financial flare ups, it is probably too soon to sound the all-clear. And while a higher interest rate climate in the medium-term will reduce …
8th February 2024
The faster-than-expected fall in wage growth in November suggests the unexpected rebound in CPI inflation in December will be fleeting. We still think that by April CPI inflation will have fallen below the 2.0% target, and further declines in utility …
7th February 2024
The news this morning that the unemployment rate is lower than previously thought increases the chances that interest rate cuts start a little later and are slower. After publishing experimental labour market data for the five months to November due to a …
5th February 2024
The Bank of England caused a lot of waves in the media and some ripples in the markets this week. But it hasn’t altered our thinking that lower inflation than the Bank of England expects will mean rates are cut from 5.25% to 5.00% in June and all the way …
2nd February 2024
While leaving interest rates at 5.25% for the fourth meeting in a row today, the Bank of England sent a signal that the next move will be a cut, but it pushed back strongly against the idea that rates will be cut soon or far. Our forecast that inflation …
1st February 2024
Cuts may come earlier than the BoE implies While leaving interest rates at 5.25% for the fourth meeting in a row today, the Bank of England sent some soft signals that the next move will be a cut, but it pushed back more strongly against the idea that …
This page has been updated with additional analysis since first publication. A turning point in credit December’s money and credit figures suggest the transition from interest rates being a drag on activity to being a boost is beginning. This lends some …
30th January 2024
In last week’s UK Economics Weekly we highlighted the lingering upside risks to inflation, which were emphasised in this week’s release of January’s flash PMIs. (See here .) But this week, we need to talk about the risk of deflation. We’ve been …
26th January 2024
This is a special Global Economics Chart Pack that provides clients with key analysis to make sense of the macro and market impact of the disruptions to maritime shipping. The charts in this document come from our brand-new shipping dashboard , which …
25th January 2024
Our new Fiscal Headroom Monitor uses a simplified version of the Office for Budget Responsibility’s (OBR’s) model to estimate how changes in market interest rate expectations and gilt yields are influencing the scope for the government to announce new …
We’ll be discussing the outlook for Fed, ECB and Bank of England policy in a 20-minute online briefing at 3pm GMT on Thursday 1 st February. (Register here .) No one to vote for a rate hike and tightening bias to be dropped Bank to push back against …
This page has been updated with additional analysis since first publication. Lingering evidence of sticky services inflation may continue to concern the BoE The small rise in the composite activity PMI, from 52.1 in December to 52.5 in January, suggests …
24th January 2024
History suggests that when one Monetary Policy Committee (MPC) member votes to cut interest rates, a majority of the nine members will agree about two meetings later. There have been 14 turning points in Bank Rate since the MPC’s inception in 1997, by …
23rd January 2024
This page has been updated with additional analysis since first publication. More wiggle room for a pre-election splash December’s better-than-expected public finances figures brought some cheer for the Chancellor after the recent run of poor outturns and …
This week’s data releases called into question our forecast that the UK economy will experience a soft landing, by which we mean inflation falling back to the 2.0% target without a big contraction in GDP. Could cigarettes and containers ignite the CPI? …
19th January 2024
This page has been updated with additional analysis since first publication. Bleak end to a dismal year, but a better 2024 awaits The 3.2% m/m fall in retail sales volumes in December was far worse than expected (consensus forecast -0.5% m/m, CE -1.0% …
The Bank of England’s Q4 Credit Conditions Survey suggests the worst of the drag on economic growth from higher interest rates is fading. That suggests an economic recovery will begin later this year. The net percentage balance of banks’ supply of …
18th January 2024
This page has been updated with additional analysis since first publication. Downward trend stalls, but drop to below 2% still coming in April The unexpected rise in CPI inflation from 3.9% in November to 4.0% in December (consensus and CE forecast 3.8%) …
17th January 2024
While sterling has outperformed other G10 currencies amid the dollar sell-off over the past couple of months, we expect it to reverse its gains against the greenback as short-term Gilt yields edge lower. So far this year, the pound has held up well …
16th January 2024
This page has been updated with additional analysis since first publication. Wage growth fading fairly fast Another big drop in wage growth in November supports our view that domestic inflationary pressures are fading fairly fast. But the ongoing …
We doubt the recent resilience of business investment in the face of higher interest rates will last. Instead, we think a drop back in business investment will contribute to the economy continuing to stagnate in the first half of this year and a modest …
15th January 2024
The rebounds in CPI inflation in both the US and the euro-zone in December (from 3.1% to 3.4% and from 2.4% to 2.9% respectively) raise the question of whether the downward trend in the UK will also stall. After all, inflation in the UK has been following …
12th January 2024
This page has been updated with additional analysis since first publication. Stagnation in Q4, but recovery in sight The 0.3% m/m rebound in real GDP in November (consensus and CE forecast 0.2%) increases the chances that the economy escaped a recession …
The lagged effects of the weak economy and high interest rates may mean that loan default rates rise in the coming months. But the prospect of interest rate cuts later this year will mean they won’t rise much. Higher interest rates and the weak economy …
10th January 2024
There are still plenty of downside risks to our below-consensus forecast that the economy will stagnate in 2024 with GDP growth of 0.0%. (See here .) But the news over the past week has highlighted three upsides. First, the slide in 2-year and 5-year …
5th January 2024
The run of softer-than-expected news on CPI inflation and wage growth means we now expect the Bank of England to cut interest rates sooner than before. Our forecast is that rates will be cut from 5.25% in June and will fall to 3.00% in 2025. The markets …
4th January 2024
This page has been updated with additional analysis since first publication. Lower mortgage rates will ease the squeeze, but still some pain to come November’s money and credit data suggest that the recent falls in mortgage rates will stimulate new …
In a change to our previous forecast, we now think that the first interest rate cut from the Bank of England will happen in June this year rather than in November. We still think that interest rates will be reduced from 5.25% now to 3.00% in 2025. That’s …
3rd January 2024
Revised data showing that real GDP contracted by 0.1% in Q3 has fuelled the debate as to whether the UK entered a technical recession over the second half of this year. But focussing on small falls (or increases) in GDP misses the point: the bigger …
22nd December 2023