Stronger growth based on shaky foundations

We are gradually getting a clearer idea of how GDP growth in the third quarter shaped up. And so far, it is looking like it will be a pretty good number. But we doubt that the recent improvement will last. Indeed, a number of temporary factors have boosted activity and there is little sign that the fundamental drivers of growth have improved much. Overall, we have not changed our view that GDP growth this year as a whole will come in at 1.3% – the slowest annual rate since the crisis.
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UK Economics Weekly

Fiscal policy back in focus

The upward shift in investors’ interest rate expectations over the past month has been remarkable. While it is impossible to predict the timing of the first rate hike with any certainty, we have more confidence in our forecast that interest rates won’t rise as far as investors expect by the end of next year. Meanwhile, all the signs are that the Chancellor will announce some fairly stringent fiscal rules in next Wednesday’s Budget and Spending Review. That may prevent any major net giveaways being announced.

22 October 2021

UK Data Response

Retail Sales (Sep.) & Flash PMIs (Oct.)

The fifth consecutive fall in retail sales in September, together with signs that non-retail spending was also weak, supports our view that the economic recovery slowed to a crawl last month. But October’s flash PMIs brought signs that price pressures are still rising, adding to the risk that the Bank of England hikes interest rates sooner rather than later.

22 October 2021

UK Economics Update

Budget Preview – Restraint now, largesse later

Despite the improving outlook for the public finances, the rumours that the Chancellor will set himself some fairly stringent fiscal rules suggest that there’s not going to be a net giveaway in the Budget and Spending Review on Wednesday 27th But our forecast that the economy will emerge from COVID-19 with less long term scarring than the Office for Budget Responsibility (OBR) expects suggests the Chancellor will be able to cancel scheduled tax hikes and/or spending cuts before the 2024 election.

21 October 2021

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Emerging Markets Economics Update

EM easing cycles not all to do with the Fed

Financial markets have come round rapidly in the last few weeks to our view that EM monetary policy will be loosened further this year. But EM loosening cycles have much more to do with weak domestic growth and low inflation than the prospect of interest rate cuts in the US.

20 June 2019

European Economics Focus

Cyprus to outperform euro-zone, but risks remain

Cyprus has now recovered from the economic crisis of 2012-13, which was caused primarily by its oversized banking sector. While a number of risks remain, notably the high level of non-performing loans, we expect the economy to continue expanding more rapidly than the euro-zone as a whole for the next few years, and the public debt ratio to fall steadily.

20 June 2019

Emerging Europe Data Response

Russia Activity Data (May)

May’s activity data suggest that, following extremely weak GDP growth in Q1, Russia’s economy has failed to gather much momentum in Q2.

20 June 2019
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