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The consumer recovery looks set for another robust year of growth in 2015. Indeed, there are a number of factors which could mean that spending growth accelerates. For a start, the halving in the oil price since last summer is beginning to provide a …
23rd January 2015
Anything that kick-starts the UK’s biggest trading partner clearly has the potential to be good news this side of the Channel too. That said, the main channel through which we think QE will work in the euro-zone is by pushing down the euro, which could …
December’s retail sales figures painted a surprisingly upbeat picture of high street spending over the Christmas period. Although we doubt spending growth can remain this strong, the prospects for the consumer recovery in 2015 remain bright. … Retail …
The latest CBI Industrial Trends Survey indicated that weak overseas demand is continuing to keep a lid on the pace of the manufacturing sector’s recovery. … CBI Industrial Trends Survey (Jan. & …
22nd January 2015
December’s public finance figures showed that the pace of deficit reduction remains very slow given the economy’s recent strength and so cast doubt over whether the much bigger planned reductions in borrowing in future years will be achieved. … Public …
The latest labour market figures showed that the recovery in real wages is gathering pace. Despite this, an interest rate rise still looks a way off, with the MPC turning its attention in its recent meeting to the risks of a persistent period of low …
21st January 2015
With E.On’s cut in gas prices probably kicking off a more widespread round of utility price cuts and oil prices falling even further last week, a brief dip into outright deflation now seems more likely than not. However, deflation in the UK will probably …
16th January 2015
The decline in UK government bond yields – to record lows at the long end of the curve – appears to have largely reflected building concerns about growth, rather than deflation. While they have fallen, break-even rates imply that the gilt market expects …
15th January 2015
We now think that a brief period of mild deflation in the UK is more likely than not. However, this should be the “good” type of deflation which will give a boost to the economy. … A brief period of “good” deflation on its …
14th January 2015
Inflation took another big step down in December and the halving in the oil price since the summer should mean that the UK comes within a whisker of deflation soon. But with the MPC focused on the medium-term outlook for inflation, its present weakness …
13th January 2015
While, on the face of it, the annual drop in the BRC’s measure of like-for-like sales in December is disappointing, there are plenty of reasons to be optimistic about the underlying strength of retail sales. … BRC Retail Sales Monitor …
The halving of the oil price since the summer has already tipped the euro-zone into deflation and looks set to turn the headline inflation rate in the US and Japan negative shortly too. We still think that the UK will just about avoid deflation, although …
9th January 2015
November’s figures on industrial production and trade presented a mixed picture of the health of the UK’s recovery towards the end of 2014. But 2015 should prove to be a better year for UK exporters and manufacturers. … Industrial Production & Trade …
With the recovery showing signs of frailty and the chances of deflation growing, the MPC is under little immediate pressure to raise interest rates. But since lower oil prices should put the spring back into the recovery’s step and underlying price …
8th January 2015
The halving of oil prices over the past six months should provide some timely support to the economic recovery. Indeed, coupled with the freezing of energy bills this winter, lower oil prices should have ensured that CPI inflation eased to just 0.5% last …
6th January 2015
Demand for mortgage lending contracted at the fastest pace since the financial crisis in the final quarter of 2014, but lenders expect a small recovery at the start of this year. By contrast, demand for commercial property loans is at a record high. … …
While the deterioration of the Markit/CIPS services survey in December brought more evidence of a soft end to 2014, we doubt that the economy is on the cusp of a renewed slowdown. Indeed, the recent collapse in the oil price should swiftly reinvigorate …
Heightened uncertainty regarding how weak inflation will be in 2015 and signs that the recovery has become less broad-based are likely to mean that the MPC keeps interest rates on hold at January’s meeting and throughout the first half of 2015. But signs …
5th January 2015
November’s household borrowing figures (released last week) showed that weak housing demand has continued to weigh on mortgage approvals. However, we doubt that this downward trend will persist. Meanwhile, although growth in unsecured lending has …
There is growing evidence that, even before the latest drop in oil prices, the US shale oil revolution had started to weigh on oil producers in Latin America. Oil exports to the US from three of the region’s major oil producers (Venezuela, Mexico and …
Over the last two months, yields on UK and US government bonds have decoupled, with 10-year yields in the UK now about 30bp lower than those across the Atlantic. Whereas strong US economic data and less dovish language in the FOMC’s most recent statement …
23rd December 2014
Whilst the latest figures on households’ finances painted a fairly discouraging picture of the third quarter of 2014, we are optimistic that rising real wages will ensure that the consumer recovery rests on more sustainable foundations in 2015, ensuring …
The latest set of national accounts leave the economic recovery looking more fragile than it appeared before. Nonetheless, there are compelling reasons to be optimistic about the growth outlook. … National Accounts & Balance of Payments …
Last week’s data releases provided more encouragement that the economic recovery has a fair amount of momentum at the end of 2014. Indeed, barring any last-minute shocks, the UK economy appears to have been the fastest growing G7 economy in 2014, with GDP …
19th December 2014
While the strength of December’s CBI Distributive Trades Survey is likely to be exaggerated by the inclusion of “Black Friday” sales, it still provides another encouraging sign on the underlying strength of the consumer recovery. … CBI Distributive …
While the latest public finance figures showed that the trend in borrowing has finally begun to improve, the pace at which the deficit is falling remains disappointingly slow given the strength of the economic recovery. … Public Finances …
The slight fall in the GfK /NOP composite index of consumer confidence is likely to be a blip. With a sustained recovery in real wages underway and employment growth set to remain strong, consumers’ spirits should start to pick up again soon. … GfK/NOP …
Whilst falling oil prices should give an immediate boost to consumers’ discretionary spending power and help to provide a source of festive cheer, rising employment and a strengthening recovery in real wages should ensure that the revival in consumer …
18th December 2014
“Black Friday” discounts provided a significant boost to November’s retail sales volumes. However, the underlying picture looks strong too and we remain optimistic on the prospects for retail spending over the coming year. … Retail Sales …
The minutes of December’s meeting indicated that the MPC remains focussed on the outlook for domestic price pressures. As such, the latest labour data showing that pay growth is building but productivity stalling suggest that Bank Rate is still likely to …
17th December 2014
The Bank of England’s stress tests highlight the progress that banks have made in strengthening their balance sheets over the last couple of years and suggest that credit supply is likely to pick up in 2015. … Stress tests suggest stronger recovery in …
16th December 2014
UK markets have taken the meaning of the word “gradual” in the Monetary Policy Committee’s forward guidance on the pace of interest rate rises to a new extreme. Overnight index swap rates imply that markets think that the MPC will wait another year before …
15th December 2014
The Bank of England will publish the results of its latest stress test of UK banks this week. While we would not like to wager that all eight banks will pass this year’s tough assessment, the lifting of another source of regulatory uncertainty after a …
12th December 2014
The colossal downward revision to the OBR’s forecast for interest payments in the Autumn Statement highlighted that the amount of austerity needed to attain a budget surplus is very sensitive to financial market conditions. While gilt yields are unlikely …
While the reforms announced today to the Monetary Policy Committee’s (MPC’s) practices will improve the transparency of monetary policy, there is a risk that the potency of policy is undermined by the new set-up which could overwhelm the markets and media …
11th December 2014
While the trade deficit narrowed in October, we would caution against reading too much into this improvement. Trade data are very volatile and exporters look likely to struggle further over the coming months. Nonetheless, we remain optimistic on …
10th December 2014
October’s industrial production data provided further signs that UK manufacturers are struggling against a crippling combination of weak overseas demand and a strong pound. But lower oil prices should help to reinvigorate the recovery in time. … …
9th December 2014
November’s BRC Retail Sales Monitor provides more evidence that a combination of strong jobs growth, recovering pay growth and falling retail goods prices is invigorating the recovery in consumer spending in the crucial pre-Christmas period. … BRC …
While the Autumn Statement once again saw the Chancellor make the most of a poor hand, we remain concerned that many of his fiscal gambles are unlikely to fully pay off. To our minds, the assumptions that the recovery will become naturally tax-rich, that …
5th December 2014
The measures announced in the Autumn Statement should provide a slight boost to consumers’ incomes next year. However, the size of the giveaway is very small. Accordingly, the onus remains on growth in real wages and employment to keep the consumer …
4th December 2014
The independent Office for Budget Responsibility (OBR) presented the Chancellor with a fairly gloomy set of economic forecasts in the Autumn Statement. Whilst there are clearly a number of obstacles to the recovery, we do not think that the OBR’s …
At last, the UK’s real wage squeeze appears to be over. Annual growth in average weekly earnings excluding bonuses picked up from 1.2% to 1.8% in September and so exceeded the same month’s CPI inflation rate (of 1.2%) for the first time in five years. And …
Low inflation is likely to have meant that the MPC’s decision to keep Bank Rate at 0.5% this month was straightforward. And while signs that the recovery is maintaining its pace and pay growth is rising suggest that a majority to raise rates could be …
November’s Markit /CIPS services PMI provided reassurance that the UK’s recovery has remained strong despite a weaker global environment and is still not causing overall price pressures to build. … CIPS/Markit Report on Services …
3rd December 2014
This checklist is intended to help clients keep track of the key measures and numbers announced during the Chancellor’s Autumn Statement at 12.30pm and to provide some instant context. Our more detailed Autumn Statement Preview , published on 27th …
Whilst the recent fall in oil prices seems unlikely to transform the pace of the UK’s economic recovery, it should provide a timely prop at a time when other sources of support appear to be fading. … Will lower oil prices turbocharge the economic …
2nd December 2014
While recent very slow growth in broad money and bank lending is not as alarming as it may initially seem, it should bolster the consensus view on the Monetary Policy Committee (MPC) that it is still too early to raise interest rates. … Monetary …
1st December 2014
October’s household borrowing figures confirmed that the sharp slowdown in housing demand has continued to weigh on mortgage approvals. However, we still think that the current weak patch in mortgage lending should prove to be fleeting. … Household …
November’s Markit/CIPS manufacturing survey signalled that strong domestic demand is ensuring that the sector’s recovery does not grind to a halt in response to weak overseas demand. Moreover, falls in oil prices should provide a timely fillip to growth. …
While the rumour mill has been fairly silent, the Chancellor is surely piecing together a small package of measures for his Autumn Statement to provide a pre-election boost to households’ finances. A rise in the threshold for the 3% stamp duty rate and – …
28th November 2014
