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.
Ruth Gregory Senior UK Economist
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UK Economics Weekly

Economy less favourable for whoever’s in Number 10

Although it is hard to predict whether by the end of next week Boris Johnson’s reign as Prime Minister will be solidifying or crumbling, we know that whoever is in Number 10 over the next year will have to deal with the cost of living crisis. Our forecast that inflation will rise to a little above 7% explains why we think GDP growth this year will fall short of the consensus forecast and why we think interest rates will be raised further than most expect, from 0.25% now to 1.25% by the end of the year. Drop-In (14:00 GMT, 26th Jan): UK Outlook -- More inflation, more interest rate hikes. Join our UK Economics team for a briefing on the 2022 outlook, including why we’re below consensus on growth but think the BoE will raise rates more than most expect. Register here.

21 January 2022

UK Data Response

Retail Sales (Dec.)

The fall in retail sales volumes in December was bigger than expected and supports our view that the Omicron outbreak in the run-up to Christmas may have dragged down GDP by 0.5% m/m, if not more.

21 January 2022

UK Economics Update

Real wage squeeze unlikely to be a rerun of 2008-14

The looming squeeze on real wages means that the near-term outlook for consumption and GDP has weakened. That said, we don’t expect anything as bad as the squeeze in 2008-14. In fact, real household disposable income may well recover by early 2023.

20 January 2022

More from Ruth Gregory

UK Data Response

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.

29 June 2021

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
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