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Labour market looks like it may be turning a corner September’s labour market figures reveal further signs that the labour market is becoming less tight. That may alleviate some of the pressure on the Bank of England to repeat November’s 75 basis point …
15th November 2022
Recession begins and not because of the extra bank holiday About half of the 0.6% m/m fall in real GDP in September and half of the 0.2% q/q decline in Q3 as a whole was caused by the one-off reduction in the number of working days due to the extra bank …
11th November 2022
Households take caution as real spending power falls The increase in precautionary household saving in September and weakening demand for credit poses an extra downside risk to our forecast that the economy will contract by 2% during a recession. These …
31st 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. This is consistent with recent data that suggests the economy …
24th October 2022
Fiscal tightening on its way as next PM has to work hard to restore credibility The weakness in retail sales and overshoot of the Office for Budget Responsibility’s (OBR) March public borrowing forecast won’t make the next Prime Minister’s task any …
21st October 2022
Underlying inflation strengthening despite weaker outlook The further strengthening in domestic price pressures despite the clear weakening in the economic outlook supports our view that the Bank of England will raise interest rates by 100 basis points, …
19th October 2022
Economy contracts as markets fret The contraction in real GDP in August 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 England are making the markets …
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 The surge in interest rate expectations since the Chancellor’s “mini-budget” will sharply raise the cost of borrowing in the economy. We now expect Bank rate to reach a peak of 5.00% which will push …
30th September 2022
Smaller economy a blow to Chancellor’s fiscal plans 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 G7 economy in that …
PMIs pointing to a recession The slip in the composite flash PMI to 48.4 in September took it further below the boom-bust level of 50 and sits comfortably with recent data that suggests the economy is already in a recession. That’s hardly a good start …
23rd September 2022
Fiscal stimulus will put borrowing back on upward trend The public finances figures brought some cheer for the new Chancellor, Kwasi Kwarteng, ahead of his fiscal statement on Friday. That said, the government’s huge fiscal expansion and the weakening …
21st September 2022
Downward momentum gathering pace The weakness in August’s retail sales volumes figures suggests that the downward momentum is gathering speed and supports our view that the economy in already in a recession. But that won’t stop the Bank of England from …
16th September 2022
Not peaked yet Despite CPI inflation easing from 10.1% in July to 9.9% in August, inflation has not peaked yet. We think CPI inflation will rise to 11.0% later this year and that the tight labour market will keep underlying inflationary pressures strong …
14th September 2022
Large shortfall in labour supply keeps labour market exceptionally tight With further evidence that the weaker economy is leading to a cooling in labour demand, the renewed fall in the unemployment rate to a new 47-year low of 3.6% was driven by a …
13th September 2022
The economy may already be in recession The disappointingly small rebound in real GDP in July suggests that the economy has little momentum and is probably already in recession. The government’s utility price freeze is unlikely to change that. The 0.2% …
12th September 2022
Outlook for credit weakening The decent rise in consumer credit values in July may overstate the current resilience of real consumer spending as credit is being supported by the rapid increases in consumer prices. Either way, as households’ spending power …
30th August 2022
Only a matter of time before PMIs point to a recession With the latest surge in wholesale gas prices set to intensify the cost of living crisis, it is probably only a matter of time before the activity PMIs start ringing the recession alarm bell. We think …
23rd August 2022
Signs of consumer resilience, another borrowing overshoot We doubt the recent resilience in consumer spending will last for much longer. Even so, July’s rise in retail sales provides another reason to think that the Bank of England will raise interest …
19th August 2022
Upward surprise will keep Bank of England in hawkish mode The encouraging evidence that the upward pressure on underlying inflation from global factors has started to ease will be of little comfort to the Bank of England given the signs that this is being …
17th August 2022
Jobs market still hot even as economy contracts June’s labour market figures revealed further evidence that the weaker economy is leading to a slightly less tight labour market. That said, by any metric the labour market is still exceptionally tight. And …
16th August 2022
Contraction in Q2 unlikely to be just a blip The 0.6% m/m drop in GDP in June was mostly due to the adverse effect of the extra Jubilee bank holiday. Even so, the GDP figures confirmed that the economy contracted by 0.1% q/q in Q2 as a whole and we have …
12th August 2022
Consumers borrowing more to cope with higher inflation The chunky increase in unsecured borrowing in June suggests that households are having to rely more on credit due to the cost of living crisis. But households won’t be able to fully offset the hit to …
29th July 2022
Pipeline price pressures have peaked Spending on travel and leisure is supporting activity and has so far prevented the UK composite flash PMI from joining the euro-zone’s PMI in contraction territory. Perhaps even more encouraging was that price …
22nd July 2022
Higher prices dragging underlying sales volumes lower Although June’s retail sales figures were boosted in some areas by the extra Jubilee bank holiday and dragged down in others, the underlying trend is that the surge in prices is weighing on sales …
Borrowing overshoot will limit next PM’s ability to help households June’s public finances figures provided more evidence that the government’s fiscal position is worse than the Office for Budget Responsibility (OBR) predicted back in March. This may …
21st July 2022
Global pressures peaking, domestic pressures strengthening There are some encouraging signs that the upward pressure on underlying inflation from global factors has started to ease. But as it is being replaced by stronger upward pressure from domestic …
20th July 2022
Jobs market still hot even as the economy slows The strong rise in the supply of workers in May helped to take some of the heat out of the labour market. Even so, the sharp increase in employment and pick-up in wage growth supports our view that the Bank …
19th July 2022
Resilience unlikely to last The recent resilience of GDP to the drag from the high rate of inflation probably won’t last and there is still a big risk that the economy falls into recession. Even so, the surprisingly strong rise in GDP in May might …
13th July 2022
Households exercising more caution The more muted rise in unsecured borrowing in May suggests the cost of living crisis and recent plunge in consumer confidence are prompting households to exercise a bit more caution. That adds to reasons to think …
1st July 2022
Households have a slightly smaller savings buffer The final Q1 GDP data leave households looking a bit more vulnerable to the big fall in real incomes that’s going to hit in Q2 and Q3. Although GDP and consumer spending won’t fall as far as real incomes, …
30th June 2022
Cost of living crisis bites harder The fall in retail sales in May suggests that the decline in households’ real incomes from surging inflation is starting to hit consumer spending a bit harder. Even so, consumer spending appears to be softening rather …
24th June 2022
Activity holding up better than expected The fact that the composite PMI didn’t fall in June means the economy could be holding up a little better than we and the Bank of England had feared. Beneath the headline numbers, the survey also suggests strong …
23rd June 2022
Weaker economy will limit the Chancellor’s ability to help households The larger-than-expected rise in public borrowing in May is an early blow for the government on a day when it is expected to lose two by-elections. What’s more, the combination of a …
Probably not “persistent” enough to seal the deal on a 50bps rate hike The further rise in CPI inflation from 9.0% in April to a new 40-year high of 9.1% in May won’t prevent the Bank of England from raising interest rates further, but it may encourage it …
22nd June 2022
First signs of a less tight labour market The tentative evidence that the recent weakening in economic activity is filtering through into a slightly looser labour market may push the Bank of England a little closer to raising interest rates by 25bps …
14th June 2022
Bank may have to raise rates during a recession The 0.3% m/m fall in real GDP in April wasn’t as weak as it looks, but it nonetheless increases the chances that the economy is slipping into recession. While this is unlikely to prevent the Bank of England …
13th June 2022
Consumers funding spending through borrowing, not savings The solid rise in unsecured borrowing in April suggests that households have turned to credit to support their spending as the cost of living squeeze has intensified. But consumers do not yet …
31st May 2022
Activity stalling, but inflationary pressures remain acute The flash PMI survey for May suggests that economic growth has slowed to a crawl and that the risk of a recession has not gone away. Even so, weakness in the economy doesn’t seem to be filtering …
24th May 2022
Changing economic winds may prevent the Chancellor from going big The economic wind that has recently been blowing the public finances to undershoot forecasts adds more pressure on the Chancellor to launch in the coming weeks a big package of measures to …
Signs of resilience The unexpectedly strong rise in retail sales in April suggests the cost of living crisis hasn’t caused consumer spending to collapse and means the economy may have a little more momentum than we previously thought. It also supports our …
20th May 2022
Worse to come as inflation may yet climb to 10% If the rise in CPI inflation from 7.0% to a 40-year high of 9.0% in April wasn’t bad enough, inflation will probably rise further to 10% in October and will then fall back to the 2% target only slowly. …
18th May 2022
Still tightening even as economy slows Even though the economy contracted in March and may be on the brink of a recession, jobs growth strengthened, the unemployment rate fell to a 47-year low of 3.7% and wage growth accelerated. This supports our view …
17th May 2022
Risk of a recession has suddenly increased It now seems likely that GDP will contract in Q2. And with the full hit of the cost of living crisis yet to be felt, the chances of a recession have just risen. Even so, with price pressures still strengthening, …
12th May 2022
Consumer spending appears to be holding up well so far The decent increase in unsecured borrowing in March suggests that the plunge in consumer confidence and fall in real incomes have not caused consumer spending to collapse. This lends some support to …
4th May 2022
Public finances won’t offer much help to the Chancellor in 2022/23 Total borrowing for the 2021/22 fiscal year overshot the Office for Budget Responsibility’s (OBR) March 2022 forecast by some £24bn, rounding out the third-worst year for the public …
26th April 2022
PMIs point to continued easing in economic growth The fall in the composite PMI in April suggests GDP growth has continued to slow as the cost of living crisis has intensified. But economic activity doesn’t appear to be collapsing. And, beneath the …
22nd April 2022
Gloomy signs of spending crunch The hefty fall in retail sales in March marks the second consecutive month of decline and adds to signs that the real wage squeeze is hitting consumer spending. With CPI inflation already at a 30-year high and set to keep …
High inflation means BoE will have to raise rates further than it expects The rise in CPI inflation in March from 6.2% to a new 30-year high of 7.0% was the sixth upside surprise in as many months and will pile more pressure on the Bank of England to …
13th April 2022
Some signs of a softening in labour demand The latest batch of data brought some signs of a softening in labour demand, but with the unemployment rate having fallen to pre-COVID levels, job vacancies at a record high and wage growth rising, the labour …
12th April 2022