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Economy stagnating even before the coronavirus The confirmation that the economy stagnated in Q4 shows that it was very weak even before the spread of the coronavirus in the UK. We expect a 15% q/q fall in GDP in Q2 and things could easily be worse. Q4’s …
31st March 2020
Worst yet to come for confidence The relatively small fall in the European Commission’s Economic Sentiment Indicator (ESI) for the UK is mainly because the survey was done prior to the UK going into a full lockdown. A much sharper drop in confidence is …
30th March 2020
No signs of a stockpiling boost or a big plunge…yet The 0.3% m/m fall in retail sales volumes in February (consensus +0.2%) suggests that even prior to the disruption from the coronavirus, consumers were already starting to rein in spending. Admittedly, …
26th March 2020
Inflation to drop to 1% in the third quarter The drop in CPI inflation from 1.8% in January to 1.7% in February is a small sign of things to come – we expect the effects of the coronavirus crisis to drag inflation below 1.0% in the months ahead. The …
25th March 2020
PMI already at record low before government restrictions bite The first conventional data for March confirmed that the coronavirus was having a massive negative impact on activity even before the Government stepped up the severity of its measures to slow …
24th March 2020
Deficit will soon explode After coming in at about 2% of GDP in 2019/20, the budget deficit will soon explode to close to the size seen in the great financial crisis. The government’s measures to combat the economic fallout of the coronavirus at the same …
20th March 2020
The last hurrah for the labour market The strong rate of employment growth at the start of the year is a rare bit of good news for the economy at the minute. But this growth will give way to a plunge in employment in the coming months. Employment rose by …
17th March 2020
Economy struggling even before the coronavirus The stagnation in GDP in January shows that the economy was weak even before people started worrying about the coronavirus. And our more timely measures of activity, such as weekly cinema sales, suggest that …
11th March 2020
Q1 was shaping up nicely until coronavirus got involved The small rise in the all-sector PMI in February suggests that Q1 was shaping up to be a good quarter for the economy. But we suspect the survey will take a turn for the worse in March as the …
4th March 2020
Confidence continues to grow but coronavirus may stop the party The European Commission’s Economic Sentiment Indicator (ESI) for the UK concurs with the message from the flash PMIs last week that the UK’s economic recovery continued in February. But …
27th February 2020
Sustained strength of PMIs confirms economy has turned a corner The continued strength of the PMIs in February proves that the surge in January wasn’t a flash in the pan and gives us confidence in our view that economic growth will pick up in the first …
21st February 2020
Households reopen their wallets January’s retail sales figures showed that December’s election result gave consumers the confidence to reopen their wallets. The more recent flooding and effects of the coronavirus may hinder sales in February and March. …
20th February 2020
Reversing the recent fall The rise in CPI inflation for the first time in six months in January was in line with the Bank of England’s expectations, so this is unlikely to move the dial on the outlook for interest rates. The jump in CPI inflation from …
19th February 2020
Solid employment growth, but wage growth slowing The larger-than-expected rise in employment in December suggests that the labour market joined the rest of the economy in turning a corner at the end of last year. However, pay growth is softening, which …
18th February 2020
Stagnation in Q4, but Q1 will be better While the first estimate of Q4 GDP showed that the economy stagnated at the end of last year, this is old news and less important than the timelier data that suggests the economy has since turned a corner. The GDP …
11th February 2020
Survey reaffirms post-election rebound January’s all-sector PMI provides the clearest sign yet that the economy has turned a corner and supports our view that the next move in interest rates may actually be up, albeit not until 2021. The upward revision …
5th February 2020
Further signs the economy has turned a corner The European Commission’s Economic Sentiment Indicator (ESI) confirmed the message from the flash PMIs last week that sentiment in the services sector improved markedly after the election, but that the …
30th January 2020
Turnaround in the economy will probably prevent a rate cut The large rebound in January’s flash activity PMIs will probably be enough to prevent the Monetary Policy Committee from cutting interest rates at next Thursday’s meeting. After all, it’s the …
24th January 2020
Less chance of a rate cut, but looser fiscal policy still on the way The rebound in the main balances of the CBI Industrial Trends Survey in January offers further evidence that sentiment has taken an upward turn after the general election. This should …
22nd January 2020
Solid employment may nudge the MPC away from rate cuts The larger-than-expected rise in employment in November suggests the labour market has turned a corner after the weakness in Q3. That could help to convince the Monetary Policy Committee to hold off …
21st January 2020
Shoppers shun Christmas spending December’s outright fall in retail sales, despite a boost from the lateness of Black Friday, does not bode well for GDP growth in December and could nudge the MPC yet closer still to cutting rates at the end of the month. …
17th January 2020
Fall in inflation pushes the MPC closer to a rate cut December’s consumer price figures showed that after a brief pause in November, inflation is back on a downward trend. This is likely to push the Monetary Policy Committee even closer towards a rate …
15th January 2020
GDP data make rate cut a close call The sharp decline in GDP in November is partly due to some activity being brought forward before the 31 st October Brexit deadline. Nonetheless it leaves the economy on course to stagnate or contract by 0.1% q/q in Q4 …
13th January 2020
PMIs suggest post-election bounce is in the works Clearly Q4 was very weak, but the decisive result of the General Election appears to have given the services PMI a bit of a boost. That jump in confidence may start to come through in other data in Q1, …
6th January 2020
GDP revised up in Q3 but economy still lacking momentum Christmas has come early with the ONS revising up GDP growth in Q3 from 0.3% to 0.4% in its annual data deluge before the festive break. But the festive cheer will probably be short-lived seeing as …
20th December 2019
Not as bad as they look At face value, November’s further drop in retail sales volumes is pretty concerning. But the picture is clouded by the late timing of Black Friday this year, which probably means November’s figures look worse than they really are …
19th December 2019
Steady inflation may persuade the MPC to remain on hold on Thursday November’s inflation figures will probably mean that the Monetary Policy Committee (MPC) will be content to sit on its hands at its meeting tomorrow. But unless the tone of the economic …
18th December 2019
Stabilisation in employment may keep the MPC away from rate cuts The larger-than-expected rise in employment in October suggests the labour market has stabilised, so the Monetary Policy Committee will probably hold off cutting interest rates at Thursday’s …
17th December 2019
Weak Q4 confirmed but green shoots may soon emerge The weak flash PMIs for the UK are another piece of evidence that suggests growth flat-lined in Q4. And if there isn’t a pick-up in the surveys in the next few months, then the MPC may respond by cutting …
16th December 2019
Economy not going anywhere in Q4 The stagnation in GDP in October is unlikely to influence many people’s vote in Thursday’s election, but it could prompt some more MPC members to vote for lower interest rates in the coming months. The 0.0% m/m outcome for …
10th December 2019
PMIs suggest economy struggling to grow at all The softening in the all-sector PMI in November suggests that GDP growth has slowed sharply in Q4 from Q3’s 0.3% q/q rise and has perhaps even turned negative. But we think that the PMIs are overstating the …
4th December 2019
Economic sentiment shouldn’t pull the rug out from under the Conservatives In contrast to the flash PMI’s for November which pointed to GDP growth slowing further, the European Commission’s Economic Sentiment Indictor (ESI) points to a stabilisation. And …
28th November 2019
PMIs chime a worrying tone for Q4 The first set of regular flash PMIs for the UK will only stoke fears that the economy is heading for a further slowdown at the end of the year. Indeed, even though we think that the PMIs are probably overstating the …
22nd November 2019
Brexit preparations force spending higher The worst October for the public finances for five years won’t prevent whoever wins the election embarking on a fiscal splurge. Borrowing appears to have been higher than expected due to Brexit preparations, and …
21st November 2019
Disappointing start to Q4 October’s fall in retail sales volumes was especially concerning as stores refrained from raising prices at all. This heightens the risk that consumer spending growth could slow in Q4 from Q3’s 0.4% q/q, adding further woe to the …
14th November 2019
Easing inflation leaves door open to interest rate cuts October’s consumer price inflation figures will do nothing to affect the Bank’s view – expressed at its meeting earlier this month – that interest rates will most likely be raised eventually if there …
13th November 2019
Resilient in the face of weak GDP growth After GDP growth disappointed expectations yesterday, the smaller than expected fall in employment in the three months to September was something of a relief. At the margin, the figures reduce the immediate need …
12th November 2019
Burst of growth in Q3 doesn’t change picture of economy in limbo While the burst of growth means that the economy avoided a recession in Q3, it’s pretty clear that underlying growth is soft and that the risks to our Q4 GDP forecast of 0.2% q/q are to the …
11th November 2019
PMIs recover, but from a very low level The recovery in the services PMI in October will allay fears that the largest sector of the economy is slipping into recession. Nonetheless, the survey suggests that the risks to our forecast that GDP growth will …
5th November 2019
Consistent with manufacturing recession While the manufacturing PMI recovered in October from September’s extremely weak level, it is still consistent with a recession in the manufacturing sector. The PMI reading of 49.6 (up from 48.3 in September) …
1st November 2019
Looser fiscal policy on the way, unless Brexit is delayed September’s better-than-expected public finances figures do not change this year’s overarching themes of higher spending and borrowing. Nonetheless, there is a high chance that the Chancellor will …
22nd October 2019
Disappointing end to Q3 September’s retail sales figures were perhaps a bit of a relief given the intense Brexit uncertainty, but were hardly a picture of strength. However, if a Brexit deal is indeed agreed soon, household spending growth should regain …
17th October 2019
Inflation surprisingly subdued in September Unchanged CPI inflation of 1.7% in September was softer than either we or the consensus (1.8%) expected which might delay interest rate hikes following a Brexit deal and increase the chances of rate cuts if …
16th October 2019
Deeper cracks appearing in the labour market The drop in employment and tick down in wage growth in August is further evidence that deeper fissures are starting to appear in the labour market. However, the unemployment rate is still low and wage growth …
15th October 2019
Recession fears banished, for the time being GDP fell on the month in August, but thanks to solid increases in May, June and July any remaining concerns that the economy fell into recession in Q3 have been well and truly banished. GDP fell by 0.1% m/m in …
10th October 2019
Losing momentum The drop in the IHS/Markit services PMI to a six-month low of 49.5 in September means that all three sector PMIs are now below the 50-mark which theoretically separates expansion from contraction, reigniting concerns that the economy is in …
3rd October 2019
Manufacturing PMI still pointing to drop in output Despite the rise in the manufacturing PMI in September, it remains at a low level and suggests the industrial sector contracted again in Q3. However, we still doubt that manufacturing will pull the …
1st October 2019
Households are healthy while the government lends a hand The revised GDP figures suggest the response to Brexit uncertainty since the referendum has been larger than previously thought. While headline GDP growth was little changed in recent years, …
30th September 2019
Consumers cautiously more confident September’s small rise in consumer confidence probably reflects the falling chances of a no deal Brexit rather than an improvement in the underlying economy. And it still leaves confidence at a pretty low level. That …
27th September 2019
Student loans and spending pledges leave the fiscal target dead in the water High government spending in the early months of 2019/20 and the change to how student loans are counted in August’s public finances data, combined with the spending increases …
24th September 2019