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The MPC should think twice before concluding that the fall in interest rate expectations and gilt yields in recent months is a sign that markets are coming around to its views on the economic outlook. The belief that US interest rates will be left looser …
7th November 2013
While real pay looks set to continue to fall until mid-2014, rising wealth, further modest gains in employment, income tax cuts and looser credit conditions should all help to sustain the recovery in consumer spending in the meantime. … Spending …
With the economic recovery proceeding more quickly than the MPC expected, but little pressure on forward guidance’s knockouts, today’s decision to leave policy unchanged was probably a unanimous one. But next week’s Inflation Report could have a material …
September’s industrial production figures showed that the sector is continuing to recover, albeit more slowly than indicated by the recent surveys. As things stand, production looks on course to rise at a faster pace in the fourth quarter than in Q3. … …
6th November 2013
The economic recovery still seems to be gathering speed. The 0.8% quarterly rise in GDP in the third quarter was the strongest expansion seen since Q2 2010. And whereas a year or so ago, the recovery was dependent on growth in a handful of sectors, output …
5th November 2013
The CIPS business surveys suggest that the UK economy got off to a very strong start in Q4. An improvement on Q3’s 0.8% expansion would seem eminently possible. … CIPS/Markit Report on Services …
The BRC’s measure of retail sales pointed to fairly subdued growth in spending in October. But we still think the outlook for the retail sector remains fairly favourable. Improving levels of consumer confidence should support spending in the near term …
With GDP growth in Q3 coming in slightly above the MPC's forecast and unemployment falling more rapidly than expected, when the Committee might reconsider the stance of monetary policy has continued to excite commentators. But with members currently …
4th November 2013
One part of the economy which has not shown much of a pick-up in recent months has been lending to households and firms. However, we are not too concerned about what, at present, is a pretty creditless recovery. Households and firms have plenty of liquid …
October’s CIPS/Markit report on manufacturing suggested that output in the sector has continued to expand at a robust pace despite recent unhelpful developments such as sterling’s appreciation and the US debt ceiling crisis. … CIPS Report on …
1st November 2013
Although it fell slightly, UK consumer confidence remained high in October and should continue to buttress growth in household spending, in spite of the headwinds presented by falling real pay and the high level of household debt. … GfK/NOP Consumer …
31st October 2013
Some of the recent recovery in spending by UK households has been accounted for by spending abroad. So while the official household spending figures show growth, data for domestic spending are less encouraging. And as the economy recovers, UK consumers’ …
30th October 2013
Recent strong growth in certain measures of broad money suggests that the economic recovery has plenty of momentum at present. But the continued weakness of bank lending remains a reason to be cautious about the growth outlook. … Monetary Indicators …
29th October 2013
Despite the revival in the housing market and the role of consumer spending in driving the rebound in the economy, the economic recovery continues to remain a relatively creditless one. But this should not act as too much of a barrier to consumers’ …
On close inspection, the recent rises in inflation expectations among households and in the gilt market appear to be nothing to worry about. The risk that the Monetary Policy Committee (MPC) abandons its forward guidance because of spiralling inflation …
28th October 2013
October's CBI Distributive Trades Survey results surprised on the downside, with sales growth at its lowest since June. But there are good reasons to think this was probably just a one-off and that retail sales should continue to grow at a decent rate. …
With last week’s GDP figures providing further evidence that the economic recovery is becoming entrenched, the recovery should be able to withstand the looming round of energy price hikes. Indeed, other recent commodity price movements have actually …
The preliminary estimate of Q3 GDP confirmed that the UK economy is currently enjoying a period of healthy and well-balanced growth. Meanwhile, Mark Carney announced last night in a speech reforms to the Bank’s liquidity provisions. … Preliminary GDP …
25th October 2013
The CBI’s Industrial Trends Survey for October and the fourth quarter provided reassurance that the manufacturing recovery has not been knocked off course by sterling’s recent appreciation or the disruption from the US debt ceiling debacle. … CBI …
24th October 2013
The prospects for the leisure sector look reasonably good. A cyclical rebound will help the sector in the near-term. And longer-term, leisure spending will disproportionately benefit as people both get richer and have more free time. … Sector insight: …
23rd October 2013
October’s MPC minutes yielded little for Bank of England watchers, with the Committee unanimously in favour of keeping policy unchanged. While unemployment is falling a little faster than the Committee expected, the scope for productivity to recover means …
Although the economic recovery has taken its time to come though in the fiscal numbers, September’s public finances data suggested that the Exchequer is now reaping the rewards of a stronger economy. The Chancellor can look forward to delivering some good …
22nd October 2013
Given the latest round of utility price rises and a further slowdown in pay growth, it might seem that the squeeze on household incomes is never going to end. However, we remain optimistic that real pay should finally start to rise again in the middle of …
21st October 2013
Although real earnings are still being squeezed hard, one positive factor for households is that the pace of the Government's fiscal tightening is easing a bit ahead of 2015's general election. But austerity is still exerting some drag on consumer …
Last week's deal on the US shutdown took the unlikely, but potentially catastrophic, possibility of a US sovereign default off the table. Admittedly, a series of potential US fiscal flashpoints still lie ahead. But there are good reasons to think they …
The consumer recovery remains on track. Consumer confidence is still rising and the housing market will receive a fillip from the second stage of the Help to Buy Scheme. Admittedly, it will be a while before real pay starts to rise again, especially with …
18th October 2013
September’s rise in retail sales volumes puts the consumer recovery back on track. While pressure on real earnings points to further growth being unspectacular, rising wealth and the boost to consumer sentiment from good news about the economy means that …
17th October 2013
The claimant count measure of unemployment has been falling more sharply than the wider ILO measure used by the MPC in its forward guidance on interest rates. While the claimant count is a timelier measure, we do not think that it necessarily heralds an …
16th October 2013
The latest labour market figures supported the MPC’s (and our own) view that even a fairly robust economic recovery will bring unemployment down only slowly. … Labour Market Data …
While a touch disappointing, September's inflation figures were not a material blow to hopes that it will fall back to its target. And we still doubt that the inflation knockouts that underpin the MPC's forward guidance are at risk of being breached. … …
15th October 2013
The Government's Help to Buy (HTB) Scheme has been criticised for stoking a potential house price bubble and exposing the taxpayer to unwarranted risks. A more overlooked danger arises from the impediment HTB may present to a recovery in business …
We think that this Wednesday’s labour market figures will show that the unemployment rate held steady in August, which could prompt markets to push back further their expected timing of the first rise in Bank Rate. Even if the unemployment rate does edge …
14th October 2013
Last week’s lacklustre official figures for trade, industrial production and construction output in August cast more doubt on whether the recovery is likely to be quite as robust and as broad-based as many of the activity surveys have indicated. …
With interest rate expectations dropping back a bit over the last month and the recovery continuing apace, today’s decision by the Monetary Policy Committee (MPC) to leave policy unchanged was predictable. And, barring unexpected shocks, a dearth of …
10th October 2013
Next week’s inflation figures look set to confirm that retailers will be burdened with another fairly hefty rise in business rates in April. While pressure is growing on the coalition to support retailers, immediate relief looks unlikely. Nonetheless, …
August’s weak industrial production and trade figures signal that GDP growth in the third quarter might not be quite as strong as the business surveys have suggested. Meanwhile, the latest Credit Conditions Survey indicates that banks are not planning to …
9th October 2013
While September saw the BRC’s measure of retail sales growth slow, that month’s warm weather explains part of the weakness. And other indicators have been more positive. Nonetheless, the consumer recovery continues to rest on fragile foundations. … BRC …
8th October 2013
Following a disappointing initial reaction to forward guidance, there could have been a case for the MPC to do more to support the recovery. But with expectations for the date of a rate rise having receded and the recovery going strong, that seems less …
The recent concerns about the type of economic recovery underway in the UK are overdone. While the recovery still faces some major challenges, we do not believe that an over-reliance on the housing market is one of them. In fact, in this …
7th October 2013
Today we are publishing our latest UK Quarterly Review, in which we are revising up our growth forecasts. Stronger growth should not stop inflation falling back to target. It won’t prevent unemployment from coming down only slowly either. Accordingly, we …
In an attempt to reinforce the Conservatives’ image of fiscal responsibility, Mr Osborne said last week that his party would return the overall public finances to surplus by 2020. This would require an additional £25bn of tightening – equivalent to …
The economic recovery is becoming more entrenched, with GDP confirmed as having grown by 0.7% in Q2 and expansion evident across all three main sectors of the economy. Meanwhile, sentiment has risen to levels not seen since the late 1990s. And although …
3rd October 2013
The CIPS business surveys continue to point to a sharp pick-up in GDP growth in the third quarter. Admittedly, they are the most upbeat of all the economic indicators at the moment. Nonetheless, GDP growth in the third quarter should have comfortably …
Following the Bank of England’s announcement of forward guidance, there have been a number of warnings about the dangers of a further prolonged period of very low interest rates. We think these concerns are overblown. Low rates are needed to aid the …
2nd October 2013
While September’s CIPS manufacturing survey softened slightly, the survey still points to a sector recovering at a rapid clip. However, with export growth weak relative to domestic demand and cost pressures persisting, some concerns remain about the …
1st October 2013
While tomorrow’s rise in the national minimum wage (NMW) is small, proposals to increase it significantly more in the future threaten to add to the pressure on retailers’ profit margins. But even if the proposed reforms go ahead, the overall outlook for …
30th September 2013
While the pick-up in certain measures of broad money is another encouraging sign that the economy has turned a corner, the continued weakness of bank lending could prevent the economic recovery from gathering much more pace in the near term. … Monetary …
Growth in household credit continues to show no sign of breaking away from the subdued rates seen since 2008, with any nascent ‘bubble’ in the housing market not yet apparent in the borrowing data. But with sentiment rising and the second stage of ‘Help …
With last week’s National Accounts showing a steep fall in business investment in Q2 and the current account deficit widening to a record high in the first quarter of this year, hopes for a rebalancing in the economy towards investment and exports are, on …
Consumer confidence in September rose to its highest level since October 2007. With real incomes still falling, it is too early to be sure that this will lead to sustained growth in household spending. But it does provide further hope that spending will …
27th September 2013
