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The Hung Parliament resulting from the General Election on balance probably increases the chances of a “softer” form of Brexit, although remaining in the single market indefinitely does not appear to be on the table. Moreover, there is still a risk of a …
9th June 2017
With no party gaining a majority in the General Election, the UK looks set to face a period of uncertainty about the outlook for policy, Brexit and the possibility of another election. It is still very early days, but here we address some initial …
Our Election Preview , published 1st June, contains our detailed analysis of the potential impact of the election. This UK Economics Update focuses on the results process and short-term implications of the possible outcomes. … A guide to election …
8th June 2017
Despite the weakness in May’s BRC Retail Sales Monitor, growth in consumer spending on retail goods still looks set to rebound in Q2. Nonetheless, the squeeze on households’ real incomes is likely to weigh on spending over the course of 2017. … BRC Retail …
6th June 2017
While the downward revision to the ONS’ estimate of Q1 GDP growth from 0.3% to just 0.2% was a disappointment, the business surveys still suggest that a pick-up in growth in Q2 is on the cards. Admittedly, the Markit/CIPS all-sector PMI, which is a …
May’s Markit/CIPS report on services still implies that GDP growth has accelerated after the sharp slowdown experienced in Q1. And the forward-looking balances suggest that this pace can be maintained in the coming months. … Markit/CIPS Services PMI …
5th June 2017
With less than a week to go until the General Election on 8th June, the polls have continued to narrow and the outcome is less certain than it seemed a few weeks ago. In this special edition of Brexit Watch, we take a look at what various election …
2nd June 2017
Despite the recent narrowing in the opinion polls, markets still seem to be banking on a sizeable Conservative majority in Thursday’s General Election. Any different outcome could therefore have a sizeable market impact. What’s more, clear differences in …
With major differences between the main parties both on Brexit and the stance and mix of fiscal policy, the outcome of the general election on June 8th could have a rather greater impact on the economy than the last few elections have done. … Election …
1st June 2017
May’s Markit/CIPS manufacturing PMI suggests that growth in the sector has reaccelerated in Q2, following the slowdown in Q1. And there are signs that this rate of growth will be maintained in the subsequent months. … Markit/CIPS Report on Manuf. …
April’s household borrowing figures provide another reason to think that consumer spending may have picked up pace in Q2, after a disappointing performance in Q1. But they will probably add to concerns about household debt. … Household Borrowing Monitor …
31st May 2017
The resilience of consumer confidence supports our view that household spending will still grow at a decent pace this year despite the squeeze on real income growth. … GfK/NOP Consumer Confidence …
The significant narrowing in the Conservatives’ poll lead over Labour has raised the risk of a more fractious Brexit. Meanwhile, comments from the ECB saw the debate over the extent to which UK financial services will be damaged by Brexit resurface. … …
26th May 2017
April’s business surveys provide hope that GDP growth will rebound in Q2 from the sharp slowdown in Q1 confirmed in this week’s official figures. Indeed, the Markit/CIPS PMI is now consistent with quarterly growth of 0.5% or so. But given that the surveys …
While the pound could fall again if the economy weakens or Brexit prospects worsen, there are good reasons to think that its recent appreciation can continue. … Sterling’s Brexit recovery can go …
25th May 2017
The second estimate of Q1 GDP presented a slightly weaker picture of the economy’s recent performance than previous numbers had suggested. But growth is likely to pick back up in the quarters ahead. … GDP: Second Estimate & Expenditure Breakdown …
Despite the weak tone of May’s CBI Distributive Trades Survey, growth in retail spending is still likely to put in a better performance in the second quarter. … CBI Distributive Trades Survey …
23rd May 2017
April’s public sector finances set the scene for a rise in borrowing for the 2017-18 fiscal year as a whole. However, the increase in borrowing should be temporary and fiscal policy is still set to drag on GDP growth for a number of years. … Public …
The release of the Conservative Party and Labour Party manifestos this week exposed some differences in their stances towards Brexit. However, the broad contours of each party’s desired Brexit outcome are not as different as they may initially seem. … …
19th May 2017
The release of party manifestos this week highlighted that, unlike in recent elections, the two main parties offer voters a real fiscal choice this time. Labour would borrow significantly more than the Conservatives over the next five years to invest in …
The strong tone of May’s CBI Industrial Trends Survey comes on top of April’s overwhelmingly-upbeat Markit/CIPS manufacturing survey and provides another reason to be optimistic that the economy has regained some pace in Q2. … CBI Industrial Trends Survey …
With CPI inflation set to reach just over 3% later this year and pay growth still subdued, the squeeze on real earnings growth should intensify as the year progresses. But the news that spending on the high street rebounded in April after the poor start …
18th May 2017
April’s retail sales figures will help to allay concerns that real consumer spending growth is slowing sharply in the face of higher inflation and provide another reason to be optimistic that GDP growth may pick back up in Q2. … Retail Sales …
The FTSE 100’s near 20% rise since the EU referendum has endorsed our view that the economic effects of Brexit will be less damaging than many had feared. But there are reasons why the rally might struggle to go much further. … When will the FTSE’s Brexit …
17th May 2017
The latest labour market figures highlighted that wage growth remains weak, despite the continued decline in labour market slack. … Labour Market …
If implemented, the Labour manifesto could boost GDP growth – by increasing investment spending – at the cost of higher debt which would potentially result in higher interest rates. … Labour would ease the fiscal squeeze …
16th May 2017
The sharp rise in CPI inflation in April mainly reflected a number of factors that won’t be repeated and we think that this brought inflation close to its eventual peak. … Consumer Prices & Producer Prices …
Growth in consumer spending has begun to lose pace in response to the pick-up in inflation that is underway. This has been seen most acutely on the high street, with survey measures of spending on consumer services having held up rather better. … Consumer …
15th May 2017
In the minutes of its latest meeting, the MPC commented that if the economy evolves in line with its forecast, rate hikes would be justified before markets currently expect. But judging by the market reaction following the meeting, others are clearly more …
12th May 2017
This week’s news brought further signs that the housing market is cooling and could suggest that we are on the cusp of a house price slump. But we doubt that the various indications of softness suggest that a sizeable and sustained downturn is now …
May’s Bank of England Inflation Report confirmed that the Monetary Policy Committee is in no hurry to raise interest rates. But it also lent some support to our view that it will begin to tighten monetary policy somewhat sooner than markets expect. … UK …
11th May 2017
Today’s activity data re-affirmed that the economy lost some momentum in Q1 but showed some signs that GDP growth is becoming slightly better balanced. … Industrial Production, Construction & Trade …
Emmanual Macron’s victory in Sunday’s French presidential election is potentially good news for the UK economy and might also provide the best background for the Brexit negotiations. … What does Macron’s victory mean for the …
10th May 2017
The evidence that consumers are gloomier about the economic outlook but upbeat about their own finances doesn’t sit comfortably together. So which picture of the consumer – unconcerned enough to continue spending strongly, or becoming more worried about …
9th May 2017
April’s BRC Retail Sales Monitor suggests that consumers loosened their purse strings over the Easter holidays and helps to allay concerns that real consumer spending growth is slowing sharply in the face of higher inflation. … BRC Retail Sales Monitor …
Press reports of growing animosity between the UK and EU have this week given a sense that the prospects for a successful and orderly Brexit have deteriorated. But formal negotiations are not yet underway, and there is little to suggest that the …
5th May 2017
Recent news on the economy might suggest that the effects of the pound’s post-referendum depreciation will be closer to those seen after the pound’s fall in 2008 – which raised inflation and squeezed real incomes – than those seen after its 1992 ERM exit, …
Weaker economic data and a rise in the pound is likely to silence some of the tentatively hawkish members of the MPC and mean that May’s Inflation Report strikes a relatively dovish tone. Nonetheless, we still think that the first hike in Bank Rate will …
We doubt that the sharper-than-expected slowdown in quarterly GDP growth from 0.7% in Q4 to 0.3% is a sign of things to come. Indeed, output surveys point to an acceleration in growth at the start of Q2. All three sector PMIs posted increases in April to …
4th May 2017
March’s household borrowing figures provide another reason to think that the consumer slowdown shouldn’t be too severe. Moreover, continued strong credit growth shouldn’t panic policymakers into tightening either monetary or macroprudential policy …
April’s Markit/CIPS Services PMI implies that quarterly GDP growth will bounce back from the sharp slowdown experienced in Q1. And March’s household borrowing figures suggest that consumer spending growth won’t slow too sharply. … Markit/CIPS Services PMI …
Q1’s GDP figures – which revealed a sharp slowdown in economic growth – have unsurprisingly raised concern that the economy is finally experiencing a major Brexit-related slowdown. However, there are a number of reasons why it is too soon to hit the panic …
2nd May 2017
April’s Markit/CIPS manufacturing PMI suggests that the sector made a strong start to the second quarter and provides hope that this strength should be maintained in the coming months. … Markit/CIPS Report on Manuf. …
Leaders of the EU27 are set to convene in Brussels tomorrow to formally agree Brexit negotiating guidelines. By insisting that sufficient progress is made on a withdrawal agreement before future trade arrangements can be discussed, the EU will give itself …
28th April 2017
The large fall in public borrowing in the 2016-17 fiscal year could suggest that the process of deficit reduction is almost complete and that the Conservatives can keep their pledge not to raise the rates of the main tax types. However, progress on …
With consumers feeling the adverse effects of sterling’s post-referendum fall, the economy has started to cool. But we doubt this is the start of a sustained slowdown. … Preliminary estimate of GDP …
Consumer confidence edged down this month, but the big picture remains that consumers are weathering the squeeze on their spending power from higher inflation well. … GfK/NOP Consumer Confidence …
After a dismal quarter for the high street in Q1, the strength of April’s CBI Distributive Trades Survey is welcome news and helps to allay fears that real consumer spending growth is slowing sharply in the face of higher inflation. … CBI Distributive …
27th April 2017
The fall in retail sales volumes in Q1 2017 suggests that the slowdown in consumer spending growth is gathering pace. But the recent strength of nominal spending offers some comfort. Retail sales volumes registered their largest quarterly fall in seven …
March’s public sector finances figures confirmed the large fall in borrowing that the OBR expected for the 2016-17 fiscal year. However, with much of the drop due to temporary factors, borrowing will probably rise slightly in 2017-18. … Public Finances …
25th April 2017
