Public Finances (May)

The double whammy of the precipitous fall in economic activity and the government’s measures to combat the crisis has already pushed the debt to GDP ratio above 100% for the first time in over 50 years. While the further easing of the lockdown on 15th June probably meant the government did not have to borrow quite as much this month as in May, it’s clear the government will still have to borrow a few hundred billion pounds this year.
Thomas Pugh UK Economist
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UK Economics Weekly

At risk of stalling, but Q3 may make up for Q2’s weakness

This week brought further signs that the “pingdemic” weighed on economic activity and evidence that in June, consumers amassed excess savings at a faster rate than in May. As a result, there’s clearly a risk Q2 GDP growth will be weaker than we previously thought. However, with the “pingdemic” likely to ease over the next month, COVID-19 case numbers falling and our CE Mobility Tracker and new electronic card payments ticking up, we are sticking with our forecast that GDP will return to its pre-virus peak in October. Even so, it’s clear that any further big gains in activity may have to wait until August.

30 July 2021

MPC Watch

Divisions emerge, but early end to BoE’s asset purchases unlikely

While the Bank of England will upgrade its near-term forecasts for inflation in its Monetary Policy Report (MPR) published on 5th August, it will probably still judge that the rise is transitory. And while Monetary Policy Committee (MPC) member Michael Saunders may break ranks to vote in favour of an early end to the Bank’s net asset purchases, we do not think others will join him in signalling that interest rate hikes are drawing closer.

29 July 2021

UK Data Response

Money & Credit (Jun.)

The money and credit data showed that consumers were willing to take on more debt in June. However, with consumers accumulating excess savings at a faster pace, there were signs that the resurgence in virus cases may have triggered some consumer caution, which could weigh on the recovery.

29 July 2021

More from Thomas Pugh

UK Data Response

Labour Market (Apr./May)

Another strong set of labour market figures released this morning will feed concerns about labour shortages and the possible impact on inflation of higher wage growth. But the level of employment is still well below its pre-crisis level and underlying wage growth is much weaker than the headline number, suggesting there is still plenty of slack in the labour market.

15 June 2021

UK Data Response

GDP & International Trade (Apr.)

The jump in GDP in April was another sign that consumers are raring to spend as the economy reopens. And all the early indicators suggest that GDP growth was strong in May as well. As such, our forecast of the economy regaining its pre-pandemic level by the autumn is on track.

11 June 2021

UK Data Response

Money & Credit (Apr.)

April’s money and credit data suggests that consumers were still wary about taking on any additional debt. But even if consumers’ willingness to borrow remains limited, they have enough firepower to finance a spending spree through rising incomes and by saving a smaller share of their income.

2 June 2021
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