Labour Market (Apr./May)

The remarkably small rise in unemployment in April suggests that the unemployment rate may not increase quite as far as we had anticipated. Even so, bigger rises are almost certainly on the way as the ILO measure catches up with more timely indicators of unemployment and firms engage in another round of redundancies as the government’s job furlough scheme is wound down.
Ruth Gregory Senior UK Economist
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UK Data Response

Public Finances (Aug.)

August’s public finances figures provided further evidence that the government’s financial position isn’t as bad as the Office for Budget Responsibility (OBR) predicted back in March. But the rumours of the Chancellor’s stricter fiscal rules suggest that in the Budget on 27th October he is more likely to use any windfall to reduce borrowing at a faster pace rather than provide any extra support to the economy.

21 September 2021

UK Economics Weekly

Weak activity news likely to stave off rate hike

On the back of the surge in inflation in August and the blistering increases in wholesale gas and electricity prices, investors and some economists have shifted their expectations of the first rate hike into Q1 2022. But a rate rise anytime soon would probably prove counterproductive. Meanwhile, we continue to think that inflation fears will ease in time, as supply shortages wane. However, the big risk is that inflation expectations keep rising and that the MPC judges in 2022 that they are too big to ignore, whatever is happening to the real economy.  

17 September 2021

UK Economics Update

Inflation to fall sharply in 2022 despite higher utility prices

Given the recent surge in wholesale gas and electricity prices to record highs, it looks likely that Ofgem will opt for another chunky hike to the price cap on households’ utility bills next April. While this will hit household real incomes, it doesn’t change our view that inflation is set to drop back sharply next year.

17 September 2021

More from Ruth Gregory

UK Economics Weekly

Households still amassing excess savings, 3rd wave fears

We don’t think that consumers’ reluctance to pay for their purchases on plastic, or their still-elevated cash holdings, are signs that they will be less willing to spend in the future. Meanwhile, the surge in new daily COVID-19 cases has raised concerns about whether the easing in restrictions will go ahead as planned on June 21st. But if there is a delay, we don’t think it will make a big difference to our GDP forecast. It is the reopening of shops, pubs and restaurants in April and May, rather than the easing of the final restrictions on social distancing, nightclubs and big events, that is the key driver of our forecast for GDP growth of 6.5% q/q in Q2 and 8.0% in 2021 as a whole.

4 June 2021

UK Data Response

Public Finances (Apr.)

April’s public finances figures showed that the government’s financial position isn’t as bad as the Office for Budget Responsibility predicted only two months ago, reinforcing our view that the tax hikes and spending cuts that most fear may be avoided.

25 May 2021

UK Data Response

Consumer Prices (Apr.)

The jump in CPI inflation from 0.7% in March to 1.5% in April (consensus forecast 1.4%) was almost entirely driven by energy price effects, which will only be temporary. We doubt a sustained increase in inflation that would concern the Bank of England will happen until late in 2023.

19 May 2021
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