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Retail Sales (Jun.)

The underlying trend in retail sales volumes is a bit weaker than the 0.5% m/m rise in June suggests. And other evidence indicates that the resurgence in the virus and the “pingdemic” may have taken some oomph out of the overall economic recovery in July.
Paul Dales Chief 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 Paul Dales

UK Markets Chart Book

Markets to regain their poise as recoveries continue

While the resurgence in COVID-19 cases that has recently weighted on UK equities, the pound and 10-year gilt yields is clearly a downside risk, our view that it won’t deal a big blow to the global or domestic economic recoveries suggests that UK equities, the pound and 10-year gilt yields will all continue their latest rebound. That said, we have revised down our financial market forecasts. We no longer expect the pound to significantly strengthen or UK equities to drastically outperform overseas equities. And because we think the Bank of England will tighten monetary policy later than the financial markets assume, we now expect 10-year gilt yields to rise from close to 0.60% now to only 0.75% by the end of this year, to 1.00% next year and to 1.25% in 2023 (down from 1.25%, 1.50% and 1.50% previously).

22 July 2021

UK Economic Outlook

Surge in inflation won’t be sustained

Our forecast that COVID-19 won’t significantly reduce potential supply means that the economy can run a bit hotter for longer without generating the persistent rise in inflation that would require monetary policy to be tightened. Admittedly, this won’t prevent the previous gains in commodity prices and component costs from triggering a rise in CPI inflation from 2.5% in June to around 4.0% by the end of the year. But it should mean that CPI inflation falls back below 2.0% in 2022 and the short-lived spike doesn’t lead to higher pay growth and inflation expectations. That’s why we think monetary policy won’t be tightened until the middle of 2023, which would be a year later than the markets expect.

20 July 2021

UK Data Response

Monthly GDP & International Trade (May)

The easing in the pace of the economic recovery in May suggests that GDP is now more likely to return to the February 2020 pre-pandemic peak in October rather than in August. The bigger point, though, is that the recovery so far has been faster than most imagined possible six or 12 months ago. And the economy may yet surprise most forecasters again by emerging from the pandemic without much scarring.

9 July 2021
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