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January’s household borrowing figures will help to assuage fears that the slowdown in the housing market is gathering pace. And consumers still appear confident enough to borrow to smooth their spending. … Household Borrowing Monitor …
1st March 2018
While household spending growth slowed markedly in 2017, the outlook for 2018 and beyond looks brighter. Indeed, the worst of the real pay squeeze appears to have passed. Following a peak of 3.1% in November 2017, CPI inflation has started to fall back …
February’s manufacturing PMI suggests that the sector has lost some momentum in Q1. But the details of the survey were more encouraging, and there is little sign in the latest money and credit figures that this weakness is broadening out to the rest of …
Consumer confidence edged back down in February, but the big picture remains that consumers are still weathering the squeeze on their spending power relatively well. … GfK/NOP Consumer …
28th February 2018
The “Canada plus, plus, plus” deal, including single market participation for some sectors, which UK Cabinet ministers reportedly agreed to this week is unlikely to be accepted by the EU in its current form. … Cabinet consensus won’t unlock …
23rd February 2018
Recent news on the UK economy, including the downward revision to Q4 GDP growth, appears to have lent more support to the consensus forecast of slower growth in 2018 than to our prediction of an acceleration. But it’s too early to throw in the towel. Not …
Despite the fall back in the headline reported sales balance, the survey still points to retail spending growth at least maintaining its current pace. And the forward-looking balances paint an upbeat picture. … CBI Distributive Trades Survey …
22nd February 2018
The second estimate of Q4 GDP revealed that the economy grew by a downwardly revised 0.4% q/q in the final quarter of 2017, with annual growth revised down from 1.8% to 1.7%. Encouragingly, however, investment growth has remained strong. And with …
Although unemployment rose in December, employment continued to grow strongly and the surveys suggest that this pace of growth will be sustained in the coming months. Meanwhile, government borrowing still looks on track to undershoot the OBR’s forecast …
21st February 2018
February’s CBI Industrial Trends Survey suggests that the growth of manufacturing output may have slowed a bit at the start of the year. But the big picture remains that the sector is still performing well by recent standards. … CBI Industrial Trends …
20th February 2018
Given that the UK Government has disagreements with the EU over the scope of the transition deal, and no new solutions to avoiding a hard border on the island of Ireland have been proposed, there is a risk that next week’s negotiations, which focus only …
16th February 2018
Inflation proved unexpectedly sticky in January, remaining unchanged at 3.0%, contrary to the consensus expectation for it to fall. However, we don’t think that the Monetary Policy Committee (MPC) needs to worry about runaway inflation. Indeed, sterling’s …
It is always a challenge to get a proper reading of the underlying strength of consumer spending growth around this time of year, with changing seasonal sales patterns (including the introduction of Black Friday) altering shopping habits. The survey …
With real incomes under pressure from weak nominal pay growth and above-target inflation, it isn’t surprising that high-street spending growth has continued to lose momentum. But the worst of the real pay squeeze should now have passed, paving the way for …
Having barely slowed in 2017, contrary to predictions of a substantial negative impact from the Brexit vote, we think that the economy will defy renewed expectations of a slowdown this year. Amid strong global growth and low interest rates, net trade and …
13th February 2018
Despite holding steady in January, we continue to think that CPI inflation will gradually drift downwards over the course of 2018. However, we still think that the Monetary Policy Committee will raise interest rates by more than markets expect. … Consumer …
While the sell-off in financial markets over the past week or so has been abrupt, we don’t think that it currently poses a big threat to the economic outlook. The relationship between equity prices and GDP growth is not particularly strong, and the …
9th February 2018
This week saw negotiations resume for the first time since the EU Council agreed in December that talks could move on to a possible transition period. However, UK Government objections to some of the terms offered by the EU for the transition period mean …
The deluge of hard data for December provides further evidence that it was the domestic demand and the services sector that drove the pick-up in growth in Q4. However, temporary distortions mean that we expect industrial production and net trade to …
The “Super Thursday” releases from the Bank of England support our long-held view that the Monetary Policy Committee would become less dovish as the economy beat expectations. Indeed, we expect the next hike to come in May and, with the MPC wanting to …
8th February 2018
2017 was a fairly dismal year for consumers. With prices rising more quickly than wages, consumer spending growth has halved since 2016. But is the worst of the squeeze now behind us, or is there further financial strain to come? We think that inflation …
7th February 2018
The survey evidence released so far paints a pretty downbeat picture for growth at the start of the year. Indeed, falls in the manufacturing, construction and services sector PMI left the all-sector index consistent, on the basis of past form, with …
6th February 2018
January’s BRC Retail Sales Monitor suggests that high-street spending growth maintained a steady pace at the start of 2018. But with inflation set to fall back this year, easing the squeeze on real incomes, there is scope for a pick-up in spending growth …
Following falls in the manufacturing and construction surveys released last week, the weak January services sector survey suggests that the economy lost the momentum it gained in Q4 at the start of 2018. However, we doubt that this is a sign of things to …
5th February 2018
The revelation that the Department for Exiting the EU (DExEU) has produced an assessment of the likely impact of various Brexit options on the economy has dominated the press this week, but does not really tell us anything new. A more significant …
2nd February 2018
We have long-argued that interest rates would rise somewhat faster, and sooner, than markets expecting. Recent comments by Governor Carney offer tentative support to this view and suggest that February’s Inflation Report could strike a more hawkish tone …
With the data continuing to surprise the Monetary Policy Committee (MPC) on the upside and the Governor sounding encouraged by progress in Brexit negotiations and a bit more upbeat on the outlook, there is a chance that the Inflation Report on February …
1st February 2018
The fall in the PMI in January suggests that manufacturing growth slowed a little at the start of the year. But the big picture is that the sector is still performing well by recent standards. … Markit/CIPS Manufacturing PMI …
January’s GfK/NOP confidence survey suggested that consumers started the year in fairly good spirits. And with real earnings likely to recover in the second half of this year, there is scope for confidence to pick up further and spending growth to regain …
31st January 2018
December’s household borrowing figures revealed a widening divergence between borrowing to fund a house purchase and borrowing to fund other areas of spending. However, we don’t think that policymakers will feel compelled to stamp out the rise in credit …
30th January 2018
A key reason why most forecasters were too gloomy about the UK economy last year was that Brexit-related uncertainty was much less damaging than they had expected. Judging by the gloominess of consensus forecasts for this year, they are about to make the …
29th January 2018
There are some reasons to think that the pound’s recent rally may struggle to go much further. Rising US interest rates could prompt something of a recovery in the ailing dollar, while Brexit uncertainty could rise again as the negotiations move on to the …
26th January 2018
The EU will publish its directives for negotiating a transitional arrangement on Monday, signalling the start of the next phase of negotiations. The UK Government seems prepared to accept the EU’s terms for a transition period which should allow it to be …
The preliminary estimate of Q4 GDP revealed that the economy picked up pace in the final three months of 2017, rounding off a solid, albeit unspectacular year. This supports our view that the consensus is too downbeat on growth in 2018 and that the MPC …
All the main balances of the CBI’s Distributive Trades Survey fell back in January. Nonetheless, the survey’s past relationship with the official figures continues to point to solid retail sales growth. … CBI Distributive Trades Survey …
25th January 2018
Stockbuilding probably knocked about 0.2pp off GDP growth last year. But there are a number of reasons to think that won’t be repeated, leaving us happy with our above-consensus forecast for GDP growth. … Will stockbuilding weigh on growth again this …
24th January 2018
The latest labour market figures provided further reassurance that the economy held up in the fourth quarter of last year. With survey indicators suggesting that jobs and wage growth should continue to pick up, we continue to expect the MPC to raise …
January’s CBI Industrial Trends Survey painted a relatively upbeat picture, suggesting that the manufacturing sector has carried a decent amount of momentum into 2018. … CBI Industrial Trends Survey …
23rd January 2018
December’s figures brought yet more good news on the current health of the public finances. And we think that stronger GDP growth will result in a more rapid improvement further ahead. … Public Finances …
December’s retail sales figures were pretty disappointing, suggesting that the sector grew by 0.4% in Q4 as a whole, half of Q3’s 0.8% rate. What’s more, growth in non-retail spending is likely to have been subdued in Q4 too. The rebound in car sales …
With the rise in the pound to its highest level against the US dollar since the eve of the EU referendum not appearing to be justified by relative interest rate expectations, some have argued that it may reflect investors becoming more optimistic, or …
19th January 2018
The recent rise in the pound against the dollar to almost $1.40, its highest level since the eve of the EU referendum, raises some concerns that a valuable source of support to economic growth – namely the boost from net trade – could soon be snuffed out. …
December’s retail sales figures were pretty disappointing. But some fall-back had always looked likely, given November’s hefty rise. And with inflation likely to have now peaked, the worst of the real pay squeeze should have passed, paving the way for a …
The fall-back in CPI inflation from 3.1% in November to 3% in December probably marks the beginning of what we expect will be a sustained downward trend over the course of 2018. Despite this, we still think that the Monetary Policy Committee (MPC) will …
16th January 2018
The possibility of a second referendum was again raised this week, but the chances of another vote happening appear slim. Meanwhile, we still expect a transitional deal to be agreed by March. But the UK’s ambition to maintain free trade in services …
12th January 2018
The recent spate of positive economic news has prompted some to raise their forecasts for Q4 quarterly growth to as much as 0.6%, double the average seen in 2017 so far. We have our doubts over whether GDP growth did grow by much more than Q3’s 0.4% rate. …
The latest hard data for Q4 supports the view that the UK economy maintained a reasonable amount of momentum, and offers some tentative signs that net trade may have provided a bigger boost to growth. … Industrial Production, Construction & Trade …
10th January 2018
December’s BRC Retail Sales Monitor suggested that Christmas trading failed to provide much relief to retailers with spending growth broadly in line with its subdued average over the past year, as the squeeze on real incomes has continued to leave …
9th January 2018
Recent evidence suggests that high-street spending has provided decent support to GDP growth in Q4. Admittedly, a weaker performance off the high street suggests that overall quarterly consumer spending growth probably slowed a little. But at least the …
5th January 2018
The latest survey evidence suggests that the economy ended 2017 on a reasonable footing. Indeed, despite a fall-back in both the manufacturing and construction PMI surveys in December, the all-sector PMI points to quarterly GDP growth of around 0.5%, a …
4th January 2018
