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While the softer tone of recent economic data may not be enough to prevent another split on the Monetary Policy Committee at August’s meeting, it supports our view that the MPC is still a way away from raising interest rates. … Sluggish GDP growth to keep …
27th July 2017
July’s CBI Distributive Trades Survey suggests that retail spending started Q3 on a solid footing and should be able to maintain recent rates of growth. … CBI Distributive Trades Survey …
We had expected nominal pay growth to remain pretty sluggish – but not to start slowing! Since this is most likely to have been due to the exchange-rate induced rise in import costs, the slowdown should prove temporary. But with more persistent factors at …
The first estimate of Q2 GDP revealed that the economy gained a little bit of momentum in the second quarter, but growth is still too weak to prompt the Monetary Policy Committee to hike interest rates in the near future. … Preliminary estimate of GDP …
26th July 2017
The CBI Industrial Trends Survey continues to suggest that the recent weakness in the hard manufacturing data will soon be reversed. And the quarterly balances suggest that the improvement will be maintained throughout Q3. … CBI Industrial Trends Survey …
25th July 2017
While the second round of negotiations made little substantive progress towards a final agreement, it did highlight the areas where there is the most work to do. Meanwhile, economic data suggested that the economy has continued to prove resilient to the …
21st July 2017
The markets are probably right to conclude that June’s drop in inflation, from 2.9% to 2.6%, has reduced the likelihood of an imminent rate rise. Admittedly, the dip in inflation needn’t rule out a rate hike at the MPC’s August meeting. For a start, the …
June’s figures suggest that the public sector finances have started to deteriorate a little. This could limit the scope for an easing in austerity and mean that fiscal policy will still provide a significant drag on GDP growth over the next few years. … …
The squeeze in real wages looks likely to intensify as inflation continues to rise to around 3%. However, nominal spending should continue to hold up well, supported by strong employment growth, resilient consumer confidence and low borrowing costs. In …
20th July 2017
June’s retail sales figures suggest that recent talk of a marked consumer slowdown has been overdone and provides another reason to think that next week’s GDP figures should reveal a re-acceleration in overall growth in Q2. … Retail Sales …
Consumer spending growth looks set to slow further this year as the real pay squeeze intensifies. But this should be offset by a stronger contribution from net trade and investment. There is a risk that uncertainty thrown up by the Brexit vote and the …
19th July 2017
While June’s unexpectedly large drop in CPI inflation is unlikely to prove a turning point, it will nonetheless help to keep the MPC’s hawks in the minority. … Consumer Prices & Producer Prices …
18th July 2017
With the effects of the lower pound appearing to be fading at the start of the production line, CPI inflation looks to have almost peaked already and we think that it will gradually start to head down towards the 2% target from next year. … Can consumers …
17th July 2017
Comments from Eurosceptic MPs revealing their indignation at paying an “exit bill” to the EU should not be conflated with the Government’s position. Indeed, the Government seems willing to make concessions in order to ensure that Brexit is a smooth …
14th July 2017
While the fall in the pound has yet to provide a significant boost to overall net trade, it has already started to support the tourism sector. And we think that net tourism spending will provide a small boost to GDP growth in the coming quarters, helping …
Despite May’s labour market figures suggesting that the economy is close to full employment, the continued weakness of wage growth provides some ammunition to the more dovish members of the Monetary Policy Committee. … Labour Market …
12th July 2017
The relatively upbeat tone of June’s retail sales monitor adds to other evidence that retail sales volumes re-accelerated at the end of Q2. And there are signs that shop price inflation has already begun to stabilise. … BRC Retail Sales Monitor …
11th July 2017
The disappointing tone of this week’s survey evidence and hard economic data has raised concern that the economy is now succumbing to Brexit fears. However, there were probably some non-Brexit related factors at play. And growth should still see some …
7th July 2017
Despite the dip in this week’s Markit/CIPS PMI surveys for June, they still provided some reassurance that growth will pick-up in Q2. But this week’s hard data for the industrial and construction sectors were far from encouraging. As a result, while we …
Today’s flurry of activity data casts some doubt on the likely strength of the bounce-back in GDP growth in Q2 and adds to the likelihood that rates will stay on hold at the next MPC meeting in August. … Industrial Production, Construction & Trade …
While there is no urgency for the MPC to dampen inflationary pressures, the extraordinary starting point of policy and general resilience of the economy suggest that UK interest rates are likely to rise a bit sooner and a bit more quickly than markets and …
6th July 2017
The incoming economic data appeared to take a bit of a turn for the worse over the past month, with the headline balances of all three Markit/CIPS PMIs falling in June. What’s more, consumer confidence fell to the lowest level since the immediate …
June’s UK Markit/CIPS report on services still suggests that GDP growth has reaccelerated in Q2, after the sharp slowdown experienced in Q1. … Markit/CIPS Services PMI …
5th July 2017
June’s Markit/CIPS manufacturing PMI suggests that growth in the sector accelerated in Q2, following the slowdown in Q1. However, it raised some questions about the sustainability of this faster rate of growth. … Markit/CIPS Report on Manuf. …
3rd July 2017
Brexit Secretary David Davis’ comments this week that enacting Brexit is more challenging than putting a man on the moon were underlined by a number of key votes in the House of Commons as well as the release of a fresh batch of EU “position papers” on …
30th June 2017
Amidst the rather confusing signals given by Bank of England Governor Mark Carney and colleagues in recent weeks, one message to become clearer is an apparent increased focus on the question of whether stronger business investment can compensate for …
While the latest Quarterly National Accounts has raised further questions about the sustainability of consumer spending growth, we don’t think that a dramatic slowdown is in prospect. … Consumer spending reliant on saving …
While Q1’s National Accounts confirmed that quarterly GDP growth slowed sharply at the start of 2017, there are signs that growth has re-accelerated. … National Accounts & Balance of Payments …
The latest consumer confidence survey suggests that the squeeze on real earnings is starting to weigh on sentiment. However, this shouldn’t prevent consumer spending growth from holding up relatively well in the near term. … GfK/NOP Consumer Confidence …
May’s household borrowing figures provide another reason to think that consumer spending growth may have picked up pace in Q2, after a disappointing performance in Q1. But the figures will clearly add to concerns about household debt. … Household …
29th June 2017
The publication today of the Financial Stability Report revealed that while the Bank of England’s Financial Policy Committee is fairly sanguine about the resilience of the financial system as a whole, it is keen to tighten lending standards for unsecured …
27th June 2017
June’s CBI Distributive Trades Survey provided further reason to think that consumer spending growth re-accelerated in Q2, after a pretty poor performance in Q1. … CBI Distributive Trades Survey …
Our upbeat view on the outlook for the UK economy might suggest we would expect the FTSE 100 to record significant further gains this year and next. But even if the economy remains resilient, there are at least four reasons to think that the index will …
23rd June 2017
At the one year anniversary of the UK’s historic vote to leave the EU, the Brexit process is still firmly in its infancy. Although face-to-face negotiations with the EU finally began this week, the Queen’s Speech highlighted the legislative challenge that …
After a surprisingly large split in the vote at June’s Monetary Policy Committee meeting, two speeches this week provided further signs of a growing rift on the Committee. Indeed, the fact that Andy Haldane – Bank of England Chief Economist – appears to …
Manufacturers’ overwhelmingly positive response to June’s CBI Industrial Trends Survey adds to other evidence suggesting that the slowdown in manufacturing output shown in the hard data will prove temporary. … CBI Industrial Trends Survey …
22nd June 2017
May’s figures suggest that the public sector finances have made a solid start to the fiscal year, although we doubt that this will continue for too much longer. And fiscal policy is still set to provide a significant drag on GDP growth in the coming …
21st June 2017
Consumers still appear confident enough to borrow in order to sustain spending growth in the face of higher inflation. But how worried should we be that higher household borrowing and debt will ultimately prompt a steep drop in spending or riskier lending …
20th June 2017
With face-to-face talks with the EU set to begin next week, it is still unclear whether or not the General Election result – which clearly weakened Theresa May’s negotiating mandate – will lead to a softening in the Government’s Brexit stance. … Brexit …
16th June 2017
This week, the Bank of England’s Monetary Policy Committee came close to voting to tighten monetary policy. At the same time, we saw claims that austerity is now over. It is remarkable therefore that markets still think the MPC will leave rates on hold …
The squeeze in real wages looks likely to intensify as as inflation continues to rise to above 3%. However, nominal spending should continue to hold up well, supported by strong employment growth, resilient consumer confidence and low borrowing costs. In …
15th June 2017
While an interest rate hike in the UK within the next few months still looks unlikely, the hawkish tone of June’s Monetary Policy Committee (MPC) policy decision and minutes supports our view that rates will rise rather sooner than markets expect. … MPC …
May’s retail sales figures show that recent rises in inflation continue to weigh on the growth in sales volumes. However, the strength of sales values suggests that, when the impact of the fall in the pound fades, volumes growth should accelerate. … …
While the general election result may prompt the Government to slow down the planned pace of fiscal tightening a bit, it would be wrong to conclude that austerity’s days are numbered. … Is austerity …
14th June 2017
Despite the significant recent erosion of slack in the labour market, wage growth has failed to keep up with inflation and will weigh on consumer spending this year. … Labour Market …
It has been suggested that Prime Minister Theresa May’s failure to gain an overall majority in last week’s General Election means that that a much softer Brexit could be back on the table. However, while some softening may now be in prospect, such a big …
13th June 2017
After rising unexpectedly in May, we think that CPI inflation is now not far away from its peak. Indeed, the effects of the lower pound already appear to be fading at the start of the production pipeline. … Consumer Prices & Producer Prices …
There are reasons why the political uncertainty triggered by the hung Parliament result won’t weigh too heavily on GDP growth. After all, the UK economy has proved resilient to recent bouts of political uncertainty and, so far, there are few signs of a …
9th June 2017
With the General Election resulting in a hung parliament, there is a lot of uncertainty about the outlook for demand, Brexit and policy. As a result, the MPC is even more likely to sit firmly on its hands than before the election at next week’s meeting …
Although all eyes this morning have been on the General Election result, a flurry of UK activity data has also been released, which has cast some doubt on the likely strength of the bounce-back in overall activity growth in Q2. … Industrial Production, …
