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Although the resignation of Liz Truss as Prime Minister leaves the UK without a leader when it faces huge economic, fiscal and financial market challenges, the markets appear to be relieved. The pound has climbed from $1.12 to $1.13 and 30-year gilt …
2nd November 2022
Households take caution as real spending power falls September’s money and credit figures point to further signs that consumers have been become more cautious in response to the weakening economic outlook. The £0.7bn rise in consumer credit (consensus …
31st October 2022
Fiscal tightening still on its way as next PM has to work hard to restore credibility The fall in gilt yields on the news today that Rishi Sunak will become the UK’s next Prime Minister has reduced the chances of a significant fiscal consolidation. Even …
24th October 2022
PMIs point more firmly to recession The decline in the composite flash PMI to 47.2 in October took it further below the boom-bust level of 50.0, placing it deeper into contraction territory, and sits with recent data that suggests the economy is heading …
Fiscal tightening on its way as next PM has to work hard to restore credibility The weakness in retail sales and further overshoot of the OBR’s March public borrowing forecast won’t make the next Prime Minister’s task any easier in navigating the economy …
21st October 2022
New Prime Minister will have to work hard to restore credibility Although the resignation of Liz Truss as Prime Minister leaves the UK without a leader when it faces huge economic, fiscal and financial market challenges, the markets appear to be relieved. …
20th October 2022
Underlying inflation still strengthening despite weakening economy The rebound in CPI inflation, from 9.9% in August to 10.1% in September (consensus 10.0%, CE 10.2%), lends some support to our view that the Bank of England will raise interest rates by …
19th October 2022
Fiscal uncertainty reduced, but inflation may be higher for longer The Chancellor didn’t just do a further U-turn on the Truss/Kwarteng policies in his statement today, he essentially wiped them out in an attempt to reassure the financial markets that the …
17th October 2022
Government still has a lot more to do to restore credibility Today’s sacking of the Chancellor and reversal of more of the tax cuts included in the mini-budget creates some downside risks to our forecast that interest rates will rise from 2.25% to 5.00% …
14th October 2022
Economy losing more momentum as the markets fret The 0.3% m/m fall in GDP in August (consensus and CE 0.0%) won’t ease the jitters in the financial markets at a time when the recent behaviour of politicians and the words of the Governor of the Bank of …
12th October 2022
Labour market won't make the Bank of England's task any easier While there were tentative signs that the labour market is cooling from the red-hot conditions seen in recent months, the shortfall in labour supply is keeping it exceptionally tight. That …
11th October 2022
Looser fiscal policy to send cost of borrowing soaring August’s money and credit figures suggest that in August consumers were starting to adjust their borrowing and savings behaviour in response to higher inflation. The £1.1bn rise in consumer credit …
30th September 2022
Smaller economy makes Chancellor’s fiscal plans look even more untenable The good news is that the economy is not already in recession. The bad news is that contrary to previous thinking, it still hasn’t returned to pre-pandemic levels. It’s the only …
Mini-budget forces BoE to step in to prevent financial crisis The continued fallout this morning from the Chancellor’s mini-budget has forced the Bank of England to step in to avoid the early stages of a financial crisis. It has postponed its plan to sell …
28th September 2022
Govt and BoE do the bare minimum, markets may yet force the issue It remains to be seen whether today’s statement by the government and the Bank of England will be enough to ease the markets’ fears about the government’s fiscal policy. The initial …
26th September 2022
BoE needs to get on front foot with big rate hike The further fall in the pound in early trading means that we’ve now reached the point where the Bank of England needs to step in in order to regain the initiative. There are a couple of ways it could do …
Chancellor gambles everything on growth The Chancellor claimed that this was a budget for growth. But unless the Chancellor’s gamble pays off and the government’s fiscal policy boosts GDP growth by 0.5-1.0ppts per annum, the risk is that once the …
23rd September 2022
Govt’s fiscal plans to force the Bank to raise rates to 4.00% The 50 basis point (bps) rise in interest rates today was partly driven by the government’s extraordinary fiscal plans that are expected to be confirmed in a not-so-mini-budget tomorrow. It’s …
22nd September 2022
Borrowing trend still worrying, despite recent improvement The public finances figures brought some cheer for the new Chancellor, Kwasi Kwarteng, after the run of fairly poor outturns seen so far this fiscal year. That said, the government’s big fiscal …
21st September 2022
Downward momentum gathering The 1.6% m/m drop in retail sales volumes in August (consensus -0.5%, CE -2.0%) supports our view that the economy is already in recession. Retail sales will probably continue to struggle as the cost of living crisis hits …
16th September 2022
Inflation has not peaked yet The easing in CPI inflation from 10.1% in July to 9.9% in August (consensus forecast and CE 10.2%, BoE 9.9%) is a bit of a relief after yesterday’s US CPI shocker, but overall and core UK CPI inflation haven’t peaked yet. As …
14th September 2022
Only faint signs of a loosening in the labour market The further fall in the unemployment rate to a new multi-decade low of 3.6% in July together with the extra pick-up in wage growth will increase the pressure on the Bank of England to deliver another 50 …
13th September 2022
Lower inflation and smaller recession, but higher interest rates and more govt debt It seems that the size and structure of the Prime Minister’s policy to freeze utility prices is broadly as expected and will reduce inflation and limit the size of the …
8th September 2022
Fiscal plans of Truss may limit depth of recession, but result in higher interest rates The news that Liz Truss will become the new Prime Minister tomorrow suggests that a big loosening in fiscal policy will limit the depth of the recession, but that …
5th September 2022
Some resilience in spending The £1.4bn (consensus £1.5bn) increase in consumer credit in July supports other evidence suggesting that consumer spending is not collapsing, although this is obviously before the big hit to households’ spending power from the …
30th August 2022
PMIs not pointing to a recession…yet Even though the S&P Global/CIPS composite flash PMI stayed above the no-change level of 50.0 in August, it probably won’t be long before it joins other indications suggesting that the economy is already in recession. …
23rd August 2022