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Money & Credit (May)

The signs that households have started to borrow again provide us with confidence that May’s surprise fall in retail sales was a result of a shift in spending from retailers to other areas as the economy continued to reopen, rather than an indication that the economic recovery is already spluttering.
Ruth Gregory Senior UK Economist
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UK Data Response

S&P Global/CIPS Flash PMIs (May)

The flash PMI survey for May suggests that economic growth has slowed to a crawl and that the risk of a recession has not gone away. Even so, weakness in the economy doesn’t seem to be filtering into an easing of price pressures. As a result, we think that interest rates still have much further to rise, from 1.00% now to 3.00% in 2023. ECB Drop-In (24th May 10:00 ET/15:00 BST): Could the ECB deliver a hawkish surprise? Join economists from our Europe and Markets teams for a discussion about what to expect from the Bank’s tightening cycle, including the chances for a bumper hike in July or even an early move at next month’s meeting. Register now.

24 May 2022

UK Data Response

Public Finances (Apr.)

The economic wind that has recently been blowing the public finances to undershoot forecasts adds more pressure on the Chancellor to launch in the coming weeks a big package of measures to help households cope with the cost of living crisis. But as the economic wind is already showing signs of becoming less favourable for the public finances, we think the support package is more likely to be small and targeted. ECB Drop-In (24th May 10:00 ET/15:00 BST): Could the ECB deliver a hawkish surprise? Join economists from our Europe and Markets teams for a discussion about what to expect from the Bank’s tightening cycle, including the chances for a bumper hike in July or even an early move at next month’s meeting. Register now.

24 May 2022

UK Economics Weekly

Inflation to rise further and linger longer than in the US and EZ

Not only did the surge in CPI inflation to 9.0% in April leave inflation in the UK above the rates in both the US and the euro-zone, but inflation in the UK will probably rise further and stay higher for longer. That feeds into our forecast that the Bank of England will have to raise rates further than it expects, from 1.00% now to 3.00%. ECB Drop-In (24th May 10:00 ET/15:00 BST): Could the ECB deliver a hawkish surprise? Join economists from our Europe and Markets teams for a discussion about what to expect from the Bank’s tightening cycle, including the chances for a bumper hike in July or even an early move at next month’s meeting. Register now.

20 May 2022

More from Ruth Gregory

UK Economics Weekly

BoE’s less hawkish stance relative to the Fed likely to persist

With few signs the Fed’s hawkishness at its May meeting has spread to the Bank of England, we think that the downward revision to market interest rate expectations has much further to go. While we find it hard to argue very strongly about the precise timing of the policy tightening in the UK, we are more convinced that it will come later than in the US (in 2023) and the mid-2022 date the markets have assumed.

25 June 2021

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
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