Filtered by Subscriptions: UK Economics Use setting UK Economics
This page has been updated with additional analysis since first publication. Some good news, but extra revenue-raising measures may still be required Christmas has come early for the Chancellor with borrowing undershooting expectations in November. But …
20th December 2024
While the Bank of England left interest rates at 4.75% today, it struck a slightly more dovish tone. This supports our view that the next 25 basis points (bps) rate cut will come in February and that the Bank will cut rates further and faster than …
19th December 2024
For our more detailed analysis of the Bank's December policy announcement, see here . Dovish hold supports our view that rates will be cut further and faster than market pricing While the Bank of England left interest rates at 4.75% today, it struck a …
This page has been updated with additional analysis since first publication. Further rebound rules out an early Christmas present from the BoE Coming on the back of the stronger-than-expected rise in wage growth in yesterday’s release, the further …
18th December 2024
This page has been updated with additional analysis since first publication. Rebound in wage growth will add to BoE’s inflation concerns The big rise in regular private sector pay growth in October will increase the Bank of England’s concerns about a …
17th December 2024
This page has been updated with additional analysis since first publication. PMIs raise concerns over the prospect of stagflation Despite the composite PMI staying at 50.5 in December, at face value it’s consistent with the 0.1% q/q rise in real GDP in Q3 …
16th December 2024
We’ll be discussing the outlook for Bank of England, ECB and Fed policy in a 20-minute online briefing at 3pm GMT on Thursday 19th December. (Register here .) At the start of this year we thought that GDP growth would gather momentum throughout the year. …
13th December 2024
This page has been updated with additional analysis since first publication. Economy at risk of contracting, partly due to the Budget The 0.1% m/m fall in GDP in October is the second such decline in a row and means there is every chance that the economy …
Deterioration in global outlook has increased the downside risks to UK GDP growth… …but Trump’s election win and the UK Budget have boosted the upside risks to UK inflation MPC to keep rates at 4.75% in December and to continue to cut by 25 basis points …
12th December 2024
With pressures on public spending continuing to grow, this has raised the chances that the Chancellor, Rachel Reeves, raises spending further in her 2025 Spending Review. If she raises spending and funds it with higher taxes, that would probably add to …
11th December 2024
Our new Bank of England Caseometer helps track whether the Bank is becoming more inclined to cut interest rates faster and further or slower and not as far. Our forecast is that rates will continue to be cut gradually, but that they will fall to 3.50% in …
10th December 2024
This publication has been updated to reflect changes to our forecasts after the October GDP release on 13th December 2024. Overview – Despite the deterioration in the outlook for the UK's key trading partners, we remain optimistic that UK GDP growth will …
The government’s new “mission” to deliver “higher living standards…through higher real household disposable income (RHDI) per person and GDP per capita by the end of the parliament” is not ambitious. Real GDP per capita has grown by 1.9% a year on average …
6th December 2024
We think that the shift in the shape of consumer spending over the past few years away from spending on goods towards spending on services is here to stay. While the recent strength in spending on housing rents may not persist, over the next couple of …
5th December 2024
In an economy where the government is boosting its spending and investment, we need to be extra cautious when interpreting the activity data. This is because there are lots of frequent indicators on private sector activity, but fewer indicators on public …
29th November 2024
We held an online session on US import tariffs on 26th November. (See a recording here ). In this Update we answer the questions we were most asked. What are Trump’s motives for threatening tariffs and will he follow through? Trump has spoken about using …
This page has been updated with additional analysis since first publication. Pre-Budget jitters clearly influenced households’ financial decisions October’s money and lending figures suggest that Budget worries prompted households to become more cautious …
The Chancellor, Rachel Reeves, has confidently claimed that she will not be “coming back with more taxes”, but developments since the Budget have already whittled away her fiscal ‘headroom’. Further tax hikes are not inevitable, but they are more likely …
28th November 2024
President-elect Donald Trump’s first threatened tariffs since the election are designed to extract concessions on drug trafficking and illegal border crossings, which means it may be possible for the countries targeted – Canada, Mexico and China – to head …
26th November 2024
We discussed the global impact of higher tariffs in a Drop-In on Tuesday, 26th November. Click here to watch the 20-minute online briefing. In this Focus, we construct a framework to explore the channels through which an import tariff works, which we use …
25th November 2024
While it was widely expected that CPI inflation would rise above the 2.0% target in October, the rebound from 1.7% to 2.3% was stronger than most forecasters had anticipated. And our view is that CPI inflation will rise further, to nearly 3.0% in January …
22nd November 2024
This page has been updated with additional analysis since first publication. Budget and Trump may have triggered slowdown in activity At face value, the fall in the composite PMI from 51.8 in October to 49.9 in November suggests that real GDP growth is …
This page has been updated with additional analysis since first publication. Slow start to the golden quarter, but the outlook is improving The bigger-than-expected 0.7% m/m fall in retail sales in October (consensus forecast -0.3% m/m) suggests that …
We have updated this page with additional analysis since first publication. Disappointing borrowing figures highlight Chancellor’s lack of wiggle room October’s disappointing public finances figures underline the fiscal challenge that the Chancellor still …
21st November 2024
This page has been updated with additional analysis since first publication. Surprisingly big rebound suggests BoE will leave rates at 4.75% in December October’s surprisingly large rebound in CPI inflation from 1.7% to 2.3% (CE 2.1%, consensus & BoE …
20th November 2024
Our senior economists hosted an online briefing to discuss the final Fed, ECB and Bank of England decisions of 2024. During the session they highlighted key takeaways from the latest communications and addressed key issues, including: What inflation and …
19th November 2024
Today’s GDP release, which confirmed that the economy has barely grown at all since March, is clearly a blow for the government given its pledge to secure the “highest sustained growth in the G7”. This means that while the UK has now surpassed Japan and …
15th November 2024
This page has been updated with additional analysis since first publication. Q3 GDP growth muted, Q4 will be better The 0.1% m/m contraction in GDP in September meant that the economy still grew by 0.1% q/q in Q3 (consensus and CE forecasts 0.2% q/q), but …
The UK is not as exposed to US import tariffs as many other economies and we suspect any resulting reduction in UK GDP would be very small. That said, the car and pharmaceutical sectors are the most vulnerable areas of the UK economy. And we don’t think …
14th November 2024
This page has been updated with additional analysis since first publication. BoE will look through rebound in pay growth Even though the rise in pay growth in September will probably be followed by a bigger gain in October, as the new 5-6% public sector …
12th November 2024
Could the collapse of Germany’s ruling ‘traffic light’ coalition open the way to more effective governance for Europe’s largest economy? What bearing will political uncertainty have on its financial markets? How will Donald Trump’s pending return …
11th November 2024
After a big couple of weeks for the UK, the US, the world and global financial markets, we have revised some of our economics forecasts. Due to the policies in the UK Budget (bigger and sooner rises in government spending than taxes, see here ), we now …
8th November 2024
Watch a recording of our post-MPC online briefing here . While cutting interest rates from 5.00% to 4.75% today, the Bank of England implied that the Budget means rates will continue to fall only gradually. We agree and due to the Budget (and not the US …
7th November 2024
Watch a recording of our post-MPC online briefing here . Budget means Bank may not cut rates as fast and far While cutting interest rates from 5.00% to 4.75% today, the Bank of England implied that the Budget means rates will continue to fall only …
The net fiscal loosening of £36bn (1.1% of GDP) in 2029/30 relative to previous plans unveiled by the Chancellor in the Budget means we now expect GDP growth of 1.8% and 1.7% in 2025 and 2026 respectively, compared to 1.5% in both years previously. But …
5th November 2024
While the market fallout from Wednesday’s Budget is still a long way from the 2022 mini-budget episode, investors are clearly nervous about the fiscal outlook. Gilt yields have risen sharply since Wednesday’s Budget. The 10-year yield is up about 21 basis …
1st November 2024
While the market fallout from yesterday’s UK budget announcement is still a very long way from the 2022 “mini-budget” debacle, the surge in Gilt yields and fall in sterling over the past couple of days has some similarities to that episode. A meltdown of …
31st October 2024
An interest rate cut from 5.00% to 4.75% seems nailed on for November It’s less clear whether BoE will quicken the pace and cut rates in December too We think cuts will remain gradual until mid-2025, with rates eventually falling to 3.00% The Bank of …
This Budget is big, both in the way it defines the government’s plans and the money it raises and spends. The key point is that it loosens fiscal policy relative to previous plans and is therefore consistent with GDP growth perhaps being a bit stronger …
30th October 2024
Our more detailed and update analysis can be seen here . Despite large rise in taxes, Budget still boosts economy As the Budget loosens fiscal policy relative to previous plans, it is consistent with GDP growth perhaps being a bit stronger and interest …
Budget has yet to affect households’ financial decisions Although consumer confidence has fallen ahead of the Budget, there is little evidence in September’s money and lending figures that Budget worries are having a big influence on households’ financial …
29th October 2024
Why does the new rule allow more borrowing? The Chancellor, Rachel Reeves, has confirmed that in next week’s Budget she will shift from targeting the Public Sector Net Debt excluding the Bank of England (PSND Ex BoE) measure of government debt to another …
25th October 2024
This page has been updated with additional analysis since first publication. Budget concerns trigger slowdown in activity The fall in October’s composite flash PMI to an 11-month low suggests that real GDP growth, after what is shaping up to be a 0.2% q/q …
24th October 2024
This page has been updated with additional analysis since first publication. Borrowing disappoints but won’t prevent the Chancellor from raising investment While it is too late for September’s disappointing public finances figures to influence the amount …
22nd October 2024
Until now, all the focus has been on the Chancellor’s £22bn fiscal “black hole”. This week a different, bigger, number hit the headlines: a £40bn “funding gap”. Why the change? A crucial distinction is the time period they relate to. The £22bn “black …
18th October 2024
This page has been updated with additional analysis since first publication. Households still increasing spending despite fears about tax rises September’s 0.3% m/m rise in retail sales volumes was stronger than expected (consensus forecast -0.3% m/m, CE …
Balancing investing in the economy and fiscal credibility In her first Budget on Wednesday 30 th October the Chancellor, Rachel Reeves, faces the unenviable task of trying to achieve three objectives. First, being able to say there will be “no return to …
16th October 2024
This page has been updated with additional analysis since first publication. Not quite as good as it looks The surprisingly large drop in CPI inflation in September increases the chances that the Bank of England will speed up the pace of interest rate …
This page has been updated with additional analysis since first publication. Further easing in wage growth supports case for more interest rate cuts The further fall in wage growth in August, together with signs that the labour market continued to loosen …
15th October 2024
It makes sense that businesses and households are getting jittery ahead of the Budget on 30 th October. After all, it’s no secret that taxes will rise. This explains the falls in both business and consumer confidence in September. (See Chart 1.) (Our …
11th October 2024
