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While elevated inflation weighed on consumer spending in the first half of 2018, a modest recovery in spending growth is in the pipeline. As the labour market continues to tighten, wage growth will rise further. And although the fall back in inflation has …
6th September 2018
The improvement in August’s Markit/CIPS report on services came as a bit of a relief after the recent run of poor data on the economy and suggested that the services sector is holding up better than the industrial sector. … Markit/CIPS Services PMI …
5th September 2018
The rises in energy and agricultural commodity prices and sterling’s recent fall will put some upward pressure on inflation, but we doubt that these factors will prevent it from easing from 2.5% now to about 2.0% in 2020. Admittedly, in the event of a “no …
4th September 2018
The fall in the headline manufacturing PMI, from a downwardly-revised 53.8 in July to 52.8 in August, leaves the survey pointing to little improvement in the manufacturing sector’s fortunes. Indeed, the reading is the lowest since the sharp fall recorded …
3rd September 2018
The EU Chief Brexit Negotiator, Michel Barnier’s suggestion that the EU is ready to offer the UK a bespoke Brexit deal has provided some reassurance that the UK is not heading for a disruptive “no deal” exit from the EU in March 2019. However, we are …
31st August 2018
The latest GfK/NOP confidence survey suggested that consumers were in fairly good spirits in August. And while Brexit uncertainty may weigh more heavily on confidence in the coming months, a gradual rise in real earnings growth should boost confidence and …
July’s household borrowing figures provided signs that consumers’ appetite for unsecured borrowing is waning. But the fact that households remain upbeat about their financial position suggests that any slowdown in borrowing growth shouldn’t be too severe. …
30th August 2018
Amid the Brexit gloom and doom this week there was at least some positive news for the Chancellor. The continued strong performance of the public finances in July suggests that he will be able to deliver the announced increase in healthcare spending …
24th August 2018
July’s public finances figures leave borrowing on course to come in comfortably below the OBR’s forecast this year, suggesting that the Chancellor should have room to manoeuvre in the Autumn Budget. … Public Finances …
21st August 2018
We have reassessed our view on the likely timing of a Brexit deal. Our working assumption is now that a deal is reached at the eleventh hour in Q1 2019, rather than in the autumn. However, we doubt that Brexit uncertainty will knock the economy off …
17th August 2018
The stronger-than-expected 0.7% monthly increase in retail sales volumes in July took the annual growth rate up from 2.9% to 3.5% and suggests that some recovery in consumer spending growth is in the pipeline. Online promotions gave a boost to non-store …
16th August 2018
The stronger-than-expected increase in retail sales volumes in July suggests that some recovery in consumer spending growth is in the pipeline. … Retail Sales …
As expected, CPI inflation ticked up for the first time since November last year in July. But as much of the rise was due to higher energy prices – which we doubt will be sustained – inflation should fall back gradually ahead. … Consumer Prices & Producer …
15th August 2018
This summer has been the warmest in more than a decade, prompting speculation that the hot weather might have given an extra boost to consumer spending. In general, though, there is very little evidence to suggest that hot summers boost consumer …
14th August 2018
Today’s labour market figures showed that the recent surge in employment has petered out and that real wage growth remains subdued, casting doubt over the likely strength of any recovery in consumer spending growth. But we still think that a gradual …
Our central scenario envisages a smooth departure from the EU on 29th March 2019. But that outcome is far from certain. And although the more extreme warnings about the short-term impact of a “no deal” Brexit on the economy are probably overdone, there is …
10th August 2018
The GDP figures confirmed that the economy bounced back after the weak start to the year and will reassure the Monetary Policy Committee that it was right to raise interest rates last week. … GDP: First Estimate …
The macroeconomic impact on the UK of the tariffs which the US has already imposed on the EU and of the retaliatory tariffs which the EU has imposed on the US, will be trivial. The threat of escalating protectionism is a concern for the future, but it is …
8th August 2018
There are still umpteen ways Brexit could play out, meaning that the cloud of uncertainty over the UK could linger for a long time yet. While the UK economy has weathered Brexit and political uncertainty well in the past, the longer it carries on, the …
7th August 2018
While we still assume that the UK and the EU will reach some sort of agreement over Brexit before the deadline next spring, there is clearly a significant possibility of no deal. In this scenario, we would expect sterling to fall a lot further, but UK …
The recent improvement in the public finance figures begs the question of whether the economy is faring better than the official growth figures suggest. However, it is not strong tax receipts driven by a booming economy that are responsible for the …
6th August 2018
After the recent run of upbeat economic news the Monetary Policy Committee’s decision to raise rates this week came as little surprise. And the hawkish tone of the Minutes and Inflation Report lent some support to our view that interest rates are likely …
3rd August 2018
Despite falling in July, the Markit/CIPS services survey suggests that the economy made a reasonable start to Q3, sustaining the pace of growth reached in Q2 of about 0.4% q/q. … Markit/CIPS Services PMI …
Despite the Monetary Policy Committee (MPC)’s hawkish forecasts accompanying the second rise in interest rates for a decade, markets are still anticipating only a very modest pace of monetary policy tightening over the coming years. We continue to think …
2nd August 2018
The Bank of England is expected to publish an estimate of the neutral interest rate (i.e. the level at which rates have neither an expansionary nor a contractionary effect on growth and inflation) for the first time on 2nd August. A number of around 2% …
1st August 2018
Despite the slight fall in the headline balance of the Markit/CIPS manufacturing PMI in July, the survey still points to an improvement in the sector’s fortunes. … UK Markit/CIPS Manufacturing PMI …
July’s Gfk/NOP survey showed that consumers became a little less optimistic at the start of the third quarter. But with real wages set to pick up pace in the coming months, there is scope for confidence to improve and spending growth to regain some …
31st July 2018
June’s rise in mortgage approvals is too small to suggest that a revival in mortgage lending is underway. Meanwhile, the unsecured borrowing figures provide another reason to think that consumer spending rose solidly in Q2. But the figures will do little …
30th July 2018
The first activity surveys for July should provide a final bit of encouragement to the MPC to raise interest rates at its meeting next Thursday. Elsewhere, the EU’s Chief Negotiator, Michel Barnier, ruled out key components of the Government’s Brexit …
27th July 2018
While a vote to raise interest rates on 2nd August is unlikely to be unanimous, we think that the Monetary Policy Committee (MPC) will press ahead with the second interest rate rise since July 2007. … MPC to press ahead with second rate rise in a …
26th July 2018
Although the more extreme warnings about the short-term impact of a “no-deal” Brexit on the economy are overdone, there is little doubt that it could deal a reasonable blow to GDP growth next year. … How much damage would a Brexit “no deal” …
25th July 2018
The UK Government’s Chequers proposals are still broadly intact following a tumultuous week in Parliament. The Prime Minister suggested that the proposals would also solve the Northern Ireland border problem. But the EU first wants to focus on a backstop …
20th July 2018
The financial markets are probably right to assume that an interest rate rise in August is still more likely than not. Somewhat counterintuitively, lower inflation might make it easier for the MPC to raise rates, as it will relieve the pressure on …
June’s public finances figures showed that government borrowing is still on track to undershoot the Office for Budget Responsibility’s (OBR’s) 2018/19 forecast. As such, it seems likely that the Chancellor will have a bit more room for manoeuvre in the …
June’s retail sales figures were a little weaker than expected, with sales volumes falling by 0.5% on the month. However, some fall back in June always looked likely after two consecutive large monthly increases in April and May. And sales still rose by …
19th July 2018
The big quarterly rise in retail sales volumes in Q2 has provided yet more evidence that a consumer revival is now underway. … Retail Sales …
With sustained rises in real wages now in prospect, real consumer spending growth should accelerate again. Of course, Brexit-related uncertainties and their economic effects could intensify over the coming quarters, particularly if Brexit turmoil results …
18th July 2018
The lower-than-expected rate of CPI inflation means that a hike in interest rates in August is less clear cut. However, we still think that it remains more likely than not. … Consumer Prices & Producer Prices …
The final set of labour market figures before the Monetary Policy Committee’s (MPC’s) August meeting will not deter the Committee from pressing ahead and raising interest rates. … Labour Market …
17th July 2018
May’s GDP figures this week confirmed that the economy is starting to regain some momentum. That said, growth was still pretty anaemic, raising the possibility that the Monetary Policy Committee could back away from raising interest rates in August. But …
13th July 2018
The betting markets are assigning a greater probability to an early general election in the UK in the wake of high-profile resignations in the Conservative Party since the Cabinet met at Chequers on Friday. Nonetheless, this hasn’t altered the view in the …
10th July 2018
Although GDP came in a touch below the consensus expectation in May, it still looks likely that quarterly growth in Q2 will be in line with the Monetary Policy Committee’s (MPC’s) expectation. As a result, we continue to expect the Committee to raise …
The proposals expected to come out of the Cabinet meeting at the Prime Minister’s country retreat, Chequers, are unlikely to be accepted by the EU. But the decision to align UK product standards with those of the EU is an important change in the …
6th July 2018
An encouraging set of Markit/CIPS surveys provided further evidence that the economy has rebounded in Q2. Meanwhile, in a speech this week, Bank of England Governor, Mark Carney, appeared to reinforce market expectations that an interest rate rise in …
The improvement in all three Markit/CIPS PMI surveys in June provided further signs that the economy has rebounded after the weak start to the year. Indeed, the all-sector PMI rose from 54.3 in May to 55.0, suggesting that quarterly GDP growth has …
5th July 2018
June’s Markit/CIPS services survey provided further signs that the economy has rebounded after the weak start to the year and keeps the Monetary Policy Committee (MPC) on track to raise interest rates in August. … Markit/CIPS Services PMI …
4th July 2018
June’s manufacturing PMI suggests that the sector has rebounded from a disappointing Q1. And the forward-looking balances provided some encouragement that the outlook for the sector has improved. … UK Markit/CIPS Manufacturing PMI …
2nd July 2018
There was nothing in the comments made by MPC members this week, nor in the latest data releases, to make us alter our view that the MPC will raise interest rates on August 2 nd . Admittedly, Jonathan Haskel’s testimony in front of the Treasury Committee …
29th June 2018
Housing market activity, and therefore mortgage lending, remains subdued. But growth in unsecured household borrowing maintained its pace in May. And still-solid consumer confidence suggests that it will accelerate ahead, and provide increased support to …
Despite the upward revision to Q1 GDP growth, the breakdown left the economy looking a little more fragile than before. But there are still reasons to be optimistic about the growth outlook. … Quarterly National Accounts …
