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Quarterly National Accounts (Q2)

The bulk of the pain of Q2’s slump in GDP had been borne by the government rather than households and businesses. But with the recovery already flattening off, fiscal support fading and the full scale of the fallout in unemployment yet to be felt, that will change in the second half of 2020.
Ruth Gregory Senior UK Economist
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UK Data Response

GDP (Jun. & Q2)

The 0.6% m/m drop in GDP in June was mostly due to the adverse effect of the extra Jubilee bank holiday. Even so, the GDP figures confirmed that the economy contracted by 0.1% q/q in Q2 as a whole and we have not altered our view that a recession is on the way later this year.

12 August 2022

UK Economics Update

What will this recession look like?

We expect a recession in 2022/23 to be driven by high inflation, with a contraction in real consumer spending at its epicentre. But with household and corporate balance sheets still relatively healthy, we suspect the recession will be mild by historical standards.

11 August 2022

UK Economics Chart Book

Increased risk of “second-round” effects

We’ve been warning for some time that CPI inflation would rise further than most people expect, triggering a recession. The prospect of even bigger rises in utility prices on 1st October and in the first half of 2023 than we have pencilled in suggests that the risks to our forecast for CPI inflation to rise from June’s 40-year high of 9.4% to 12.5% in October are now skewed to the upside. That increases the risk of bigger, longer-lasting second-round inflation effects. Admittedly, there have been some encouraging signs that price pressures towards the start of the inflation pipeline have passed their peak. But it is worrying that domestic inflationary pressures, such as those in the services sector, are still rising, as they tend to last longer. As a result, we still think that the Bank of England will raise interest rates from 1.75% to 3.00% even when the economy is in recession.

10 August 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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