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The improvement in the public finances in December means that borrowing in the current fiscal year should be slightly below the OBR’s November forecasts. And we think stronger GDP growth will result in more rapid improvement further ahead. … Public …
24th January 2017
Today’s decision by the Supreme Court to uphold the High Court’s ruling that the Government must have Parliament’s approval before triggering Article 50 is still significant. In fact, arguably, the vote matters more than the vote that Theresa May granted …
The unveiling of the Government’s broad plans for Brexit helped to drive the pound higher this week. However, this probably largely reflects a slight reduction in uncertainty, rather than optimism about the content of the plans themselves. … Brexit Watch: …
20th January 2017
Household spending has remained remarkably robust, despite Brexit uncertainty. Admittedly, this looks unlikely to last. After all, while wage growth is picking up, inflation is on the rise too. Indeed, CPI inflation looks set to pick up to around 3% by …
While the Monetary Policy Committee (MPC) has stated that it is willing to look through a period of exchange-rate driven above-target inflation, one of its conditions is that there are no significant second-round effects on domestic cost pressures. On the …
December’s disappointing retail sales figures suggested that shoppers lost some festive cheer at the end of last year. And 2017 is likely to see a further slowdown in spending, as inflation continues to rise and squeezes growth in real incomes. … Retail …
The latest data suggest that while the labour market has lost some of its shine, it remains resilient despite Brexit uncertainty. … Labour Market …
18th January 2017
Today’s speech by PM Theresa May, which set out the Government’s broad objectives ahead of the formal negotiations with the EU, contained little more than what was widely expected. Nonetheless, it did provide at least a little more certainty about the …
17th January 2017
While December’s rise in CPI inflation was greater than expected, the increase was driven by components that shouldn’t have too much of an effect on the MPC’s stance on monetary policy. … Consumer Prices & Producer Prices …
The pound has suffered another bumpy ride this week, as concerns about the economic impact of a “hard Brexit” have lingered. That said, some of the positive impacts of the lower exchange rate were evident in the buoyant stock market, and the latest …
13th January 2017
The recent strong growth of unsecured household borrowing has prompted concerns that, far from snapping their wallets shut in response to Brexit worries, UK consumers have embarked on another credit-fuelled spending boom. But broader forms of borrowing …
The latest deluge of economic data as part of the ONS’ new “Theme Days” added to other evidence suggesting that the economy maintained a decent amount of momentum in the fourth quarter, and that growth has become better balanced. … Industrial Production, …
11th January 2017
While the latest fall in the pound could potentially push inflation higher than otherwise, it should strengthen the already considerable beneficial effects of a weaker currency too. … Still no need to panic about the …
10th January 2017
December’s BRC Retail Sales Monitor revealed a strong end to the year for consumer spending. But a slowdown in spending growth looks to be in prospect this year, as higher inflation starts to weigh on the growth in households’ real incomes. … BRC Retail …
The very beginning of 2017 has not been shy of Brexit-related drama, although none of it appears to have particularly rattled financial markets. This probably reflects the fact that the latest data has provided further evidence that economic growth barely …
6th January 2017
Revisions from the ONS mean that quarterly GDP growth in Q3 is now estimated to have been 0.6% – the same as in Q2. What’s more, business surveys suggest that this pace was maintained in Q4. Admittedly, the surveys also brought more evidence of …
While we have been considerably more upbeat than other forecasters about the outlook for the UK economy in 2017, the positive tone of recent indicators suggests that even we might have been a bit too pessimistic. Last week’s PMI surveys for December …
December’s Markit/CIPS report on services added to the evidence that the economy will turn in another strong performance in Q4 and hasn’t lost any momentum since the vote to leave the EU. That said, the survey highlighted the inflationary pressures …
5th January 2017
November’s household borrowing figures showed that borrowing growth remains strong, despite the Brexit vote, and that the housing market continues to regain its momentum. Admittedly, the small rise in mortgage approvals for new house purchase from 67,371 …
4th January 2017
The significant improvement in the December Markit/CIPS manufacturing survey’s main balances provides more evidence that the sector’s post referendum weakness will prove short-lived. This should help prevent GDP growth from losing too much momentum in the …
3rd January 2017
The latest Quarterly National Accounts provided further reasons to think that recent rates of spending growth will not be sustained next year. That said, we do not anticipate that a dramatic slowdown in spending will occur either. … Strong spending rests …
23rd December 2016
There are indications that the Government may be moving away from the recent “soft” Brexit rhetoric this week. But given the growing signs that it is also considering some sort of “transitional” arrangement for leaving the EU, this suggests that Brexit is …
As well as being the end of the year, it is now six months since the UK voted to leave the EU and so it is a good time to take stock of where we are, what we got right, what we got wrong, and what to expect in 2017. The early evidence suggests that our …
The latest Quarterly National Accounts suggest that the economy grew more quickly after the referendum than previously estimated. Moreover, the latest surveys suggest that the economy will turn in another solid performance in Q4. … National Accounts & …
While consumer confidence rose slightly in December, the headline balance suggests that the strong pace of retail spending won’t last too much longer. That said, low interest rates and a resilient labour market should ensure that spending growth still …
22nd December 2016
The improvement in the public finances in November leaves borrowing on track to meet the OBR’s Autumn Statement forecasts for the current fiscal year. And we think stronger GDP growth will result in a more rapid improvement further ahead. … Public …
21st December 2016
On the face of it, the early evidence suggests that exporters are using the drop in the pound to boost margins as opposed to market share. This poses a risk to our optimistic forecasts for exports, but does not necessarily weaken the outlook for GDP …
20th December 2016
December’s CBI Distributive Trades Survey suggests that retail spending has put in a strong performance during the festive period. However, consumer spending growth still looks set to slow in the coming quarters. … CBI Distributive Trades Survey …
This week has brought further indications that the Government is leaning towards a soft(ish) form of Brexit and some sort of transitional arrangement. Meanwhile, the economy has continued to hold up well. But the adverse effects of sterling’s slump are …
16th December 2016
The MPC has not surprisingly emphasised the importance of inflation expectations in determining the degree to which it is prepared to tolerate an overshoot of the inflation target. After all, low inflation expectations appear to have helped to keep wage …
December’s CBI Industrial Trends Survey offered another reason to think that the manufacturing sector is in better health than the recent weak official data suggest. … CBI Industrial Trends Survey …
There has been no sign of a let-up in the strong pace of high-street spending growth at the start of the festive season. But it seems doubtful that spending will maintain its recent strength in the New Year. For a start, inflation will probably breach the …
15th December 2016
The unanimous decision by the Monetary Policy Committee (MPC) to leave interest rates on hold and the scale of its asset purchases unchanged, at the same time as the US Fed has resumed tightening policy, highlights the likely divergence in policy rates …
Retail sales growth continued to rise in November, following October’s surge, suggesting the retail sector will provide strong support to GDP growth in Q4. Nonetheless, the rate of spending growth looks unsustainable, due to the number of headwinds that …
There are some tentative signs that the jobs market has lost some of its earlier strength. But we don’t expect any weakening to be particularly severe. … Labour Market …
14th December 2016
The rise in CPI inflation is part of an upward trend which will see inflation peak at about 3% in early 2018. However, we don’t think it will trouble the MPC too much. … Consumer Prices & Producer Prices …
13th December 2016
Although we won’t know the outcome of this week’s Supreme Court hearing until (probably) January, whichever way it goes, the Government may still be able to trigger Article 50 by March 31st. That said, with the EU’s chief negotiator highlighting the tight …
9th December 2016
There are concerns that the expected rise in inflation will cause consumer spending growth to slow sharply ahead. Indeed, households would probably have to run their saving rates far below all-time lows in order to maintain their recent pace of spending …
The UK’s trade deficit narrowed sharply in October, following a large upward revision to the Q3 deficit. And the drop in the pound should support net trade’s contribution to GDP growth in the coming months. … Trade …
The Monetary Policy Committee (MPC) will take some comfort from recent data suggesting that the economy has maintained its momentum in Q4, while sterling’s recovery may have lessened the extent to which inflation will overshoot the MPC’s target. …
8th December 2016
October’s industrial production figures showed that the sector started Q4 on a weak footing, following the contraction experienced in Q3. However, the outlook for the sector further ahead appears brighter. … Industrial Production …
7th December 2016
November’s BRC Retail Sales Monitor indicated that shoppers can still be tempted by a bargain, despite weakening confidence. But the fundamentals still point to a slowdown in spending ahead. … BRC Retail Sales Monitor …
6th December 2016
Both households and businesses appear to have been undeterred by Brexit uncertainty in Q3. What’s more, the latest business surveys suggest that the economy will turn in another solid performance in Q4. Gains in both the Markit/CIPS services and …
5th December 2016
November’s Markit/CIPS Report on Services suggests that the UK economy will turn in another solid performance in Q4. … Markit/CIPS Report of Services …
There have been further indications this week that the government is moving away from some of the “hard Brexit” rhetoric which had emerged in recent months. That said, the government faces a difficult battle with the public, as immigration was shown to …
2nd December 2016
The past few weeks have brought yet more relatively upbeat economic news and the first estimate of investment in Q3 was no exception. But we wouldn’t read too much into a single set of figures. And economists’ forecasts for investment growth in 2017 – …
November’s Markit/CIPS manufacturing PMI implies that the sector has gained some momentum, following a post-referendum contraction. This should help ensure GDP growth doesn’t slow too much in the near term. … Markit/CIPS Report on Manuf. …
1st December 2016
While the Bank of England’s Financial Stability Report (FSR) suggested that the UK financial system has fared well during recent uncertainty, it highlighted lingering risks. Nonetheless, we think that some of these risks could have a positive element to …
30th November 2016
The stumble in consumer confidence in November is another sign that the recent strength in spending is unlikely to last. Nonetheless, low interest rates, a resilient labour market, and less fiscal tightening than previously planned should ensure that …
October’s household borrowing figures provided further evidence that the slowdown in mortgage lending has bottomed out and that consumers’ appetite for debt hasn’t been affected much by the Brexit vote. … Household Borrowing Monitor …
29th November 2016
