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Labour market still tightening despite unwinding of the furlough scheme The latest data brought more signs that labour market slack is declining fast and that labour shortages are contributing to faster underlying pay growth. We suspect that beyond the …
14th September 2021
Virus cases and shortages stall the recovery The rise in COVID-19 cases and the product/labour shortages are probably behind the stalling in the UK’s economic recovery in July. With next week’s CPI release set to reveal a jump in inflation from 2.0% to …
10th September 2021
Households’ appetite for credit subdued The latest money and credit figures do little to ease mounting concerns that the resurgence in virus cases in July and so-called “pingdemic” brought the consumer recovery to a halt. Consumers did not borrow …
31st August 2021
Recovery slowing more quickly than we had thought The chunky fall in the composite activity PMI suggests that the economy struggled to gain fresh momentum in August despite the apparent easing of the “pingdemic” and the final relaxation of all domestic …
23rd August 2021
Retail sales slump, but better news on the public finances While there was good news on public borrowing, the slump in retail sales added to other evidence indicating that in July the economic recovery slowed to a crawl. Although public sector net debt …
20th August 2021
Still on course to reach 4.5%, despite July’s fall July’s drop in CPI inflation is likely to be followed by sharp rises in the next few months, taking inflation to a peak of about 4.5% by the end of the year. But provided the spike in inflation does not …
18th August 2021
Surge in earnings growth, but underlying pay pressures contained The latest batch of data brought signs that labour shortages are feeding through into higher pay growth in certain sectors. But underlying pay pressures were reasonably contained overall, …
17th August 2021
Recovery regains some momentum The media headlines have focused on the big 4.8% q/q gain in GDP in Q2, following Q1’s 1.6% q/q fall. But the real news was the unexpectedly strong growth in June which suggested that the recovery maintained a bit more …
12th August 2021
Resurgence of virus triggers some rise in consumer caution The money and credit data showed that consumers were willing to take on more debt in June. However, with consumers accumulating excess savings at a faster pace, there were signs that the …
29th July 2021
Recovery becoming more tepid The second consecutive decline in the flash composite PMI in July came as no surprise to us as we expected the pace of the economic recovery to naturally slow after the big gains following the reopening of retail and …
23rd July 2021
Some signs of softening The underlying trend in retail sales volumes is a bit weaker than the 0.5% m/m rise in June suggests. And other evidence indicates that the resurgence in the virus and the “pingdemic” may have taken some oomph out of the overall …
Higher interest costs won’t stop deficit from falling quicker than OBR expects June’s public finances figures provided further evidence that the strong economic recovery is feeding through into lower government borrowing. So despite rising debt service …
21st July 2021
Job market slack will keep underlying pay pressures contained May’s figures paint a picture of a labour market well on its way to recovery and will further fuel concerns about labour shortages and the possible boost to inflation from higher wage growth. …
15th July 2021
Higher commodity prices and shortages starting to boost inflation The rise in CPI inflation from 2.1% in May to 2.5% in June was smaller than the leap in US inflation to 5.4% released yesterday, but we think the gap between the two will shrink as …
14th July 2021
Losing a bit of verve The easing in the pace of the economic recovery in May suggests that GDP is now more likely to return to the February 2020 pre-pandemic peak in October rather than in August. The bigger point, though, is that the recovery so far has …
9th July 2021
Larger stock of savings an upside to economic recovery The small downward revision to Q1 GDP growth probably won’t stop the economy from rising back to its pre-pandemic peak in the coming months. And the larger-than-expected rebound in the household …
30th June 2021
Households resume pre-virus borrowing habits The signs that households have started to borrow again provide us with confidence that May’s surprise fall in retail sales was a result of a shift in spending from retailers to other areas as the economy …
29th June 2021
Pace of economic recovery may be peaking The fall in the flash composite PMI from a record high of 62.9 in May to 61.7 in June indicates that the pace of the recovery may have peaked. That suggests the monthly rises in GDP will ease back from the 2.3% m/m …
23rd June 2021
Stronger economy feeding through to lower borrowing May’s public finances figures suggest the strong economic recovery is starting to feed through into lower government borrowing. This reinforces our view that the tax hikes and spending cuts that most …
22nd June 2021
Less time shopping, more time socialising Rather than suggest the economic recovery is already spluttering, the decline in retail sales in May is probably just a result of the reopening of indoor hospitality in mid-May prompting households to spend less …
18th June 2021
Reopening of the economy may push inflation up to 3% With businesses having raised their prices by more than we expected once they reopened after COVID-19 lockdowns ended, we now think CPI inflation will rise to a peak of 2.9% later this year compared to …
16th June 2021
Strong recovery underway but still plenty of slack Another strong set of labour market figures released this morning will feed concerns about labour shortages and the possible impact on inflation of higher wage growth. But the level of employment is still …
15th June 2021
Recovery stepped up a gear as economy reopened The jump in GDP in April was another sign that consumers are raring to spend as the economy reopens. And all the early indicators suggest that GDP growth was strong in May as well. As such, our forecast of …
11th June 2021
Consumers funding spending by saving less, not borrowing more April’s money and credit data suggests that consumers were still wary about taking on any additional debt. But even if consumers’ willingness to borrow remains limited, they have enough …
2nd June 2021
Borrowing undershoot likely to continue April’s public finances figures showed that the government’s financial position isn’t as bad as the Office for Budget Responsibility (OBR) predicted only two months ago, reinforcing our view that the tax hikes and …
25th May 2021
Economic recovery shifting through the gears Another rise in the flash composite PMI from 60.7 in April to a record high of 62.0 in May points to the economic recovery shifting through the gears and picking up speed. That suggests the pace of the rises in …
21st May 2021
Rocketing retail sales fire up the recovery The surge in retail sales volumes in April shows that households flooded back to the shops once they reopened in the middle of the month and suggests there is even some upside risk to our forecast that the …
Burst of inflation temporary, but upside risks remain The jump in CPI inflation from 0.7% in March to 1.5% in April (consensus forecast 1.4%) was almost entirely driven by energy price effects, which will only be temporary. We doubt a sustained increase …
19th May 2021
On the front foot Today’s data release suggests that the labour market is now on the front foot. Admittedly, the unemployment rate may still rise over the rest of this year. But this will probably be due to people re-joining the labour market rather than …
18th May 2021
Shifting into gear even before the COVID-19 restrictions were lifted The burst of growth in March shows that the recovery has been gathering momentum more quickly than we had thought and suggests that the risks to our forecast for the economy to return to …
12th May 2021
Green shoots of a consumer revival March’s money and credit data provides some signs that a consumer revival was underway even before the COVID-19 restrictions were eased in mid-April. But even if consumers’ willingness to borrow remains limited, they …
4th May 2021
Surge in activity as the economy emerges from restrictions The surge in April’s flash composite PMI suggests that the economy has begun to gather momentum. And this is probably a taste of things to come over the next few months as the shackles from the …
23rd April 2021
Retailers post strong gains even before they open March’s strong rise in retail sales showed that the economy made a fair bit of progress even before non-essential retailers reopened in April. And sales will probably leap further in April. The 5.4% m/m …
Borrowing undershoot in 2020/21 to persist The further rise in public borrowing in March rounded out the worst year for the public finances since 1947. But borrowing was £24.3bn lower than the Office for Budget Responsibility (OBR) predicted just a month …
Starting the climb up to 2.0% The rebound in CPI inflation from 0.4% in February to 0.7% in March is the start of a rise to about 1.5% in the next few months and to above 2.0% by December. But as we doubt inflation will stick above 2.0% until late 2023, …
21st April 2021
Steady as she goes The slight fall in the unemployment rate in February suggests that the government’s job furlough scheme is still insulating the labour market from the worst effects of the pandemic. We still expect the unemployment rate to rise to a …
20th April 2021
The climb out of the latest COVID-19 hole begins Given there was no change in the lockdown restrictions in February, GDP was never going to shoot back up. But the small rise does suggest that January was probably the low point of the year. We think that …
13th April 2021
High saving rate paves the way for rapid rebound in 2021 The upward revision to GDP in the second half of 2020 means the economy does not have quite as far to recover from the COVID-19 crisis. And Q4’s high saving rate leaves plenty of scope for a rapid …
31st March 2021
Households still saving, small businesses still borrowing The COVID-19 lockdown pattern of households paying back credit and investing in property but small businesses loading up on debt continued in February. We doubt much changed in March, but this …
29th March 2021
Third COVID-19 lockdown capping the extent of the rebound The fairly modest rise in retail sales volumes in February affirmed that the third COVID-19 lockdown has been tough for retailers, keeping sales suppressed following the plunge in January. But that …
26th March 2021
PMIs rise as some businesses prepare to reopen The rise in the IHS Markit/CIPS composite activity PMI in March suggests that the economy has started to pick up. And once the COVID-19 shackles start to be released next month, activity will probably rebound …
24th March 2021
Drag from lockdown won’t last The drag on CPI inflation in February from the COVID-19 lockdown will delay the rebound in inflation to 2.0% and perhaps prompt the markets to reconsider their view that interest rates will rise next year. The fall in CPI …
Continuing to hold up well The drop in the unemployment rate from 5.1% in December to 5.0% in January highlights once again the extent to which the government’s job furlough scheme has protected jobs during the pandemic. We still expect the unemployment …
23rd March 2021
Borrowing set to end the financial year on the up February’s public finances figures showed that borrowing may come in a little below the OBR’s 2020/21 forecast of £355bn. But if we are right in thinking the economic recovery will be faster and fuller …
19th March 2021
January probably the low point for the year The good news is that the 2.9% m/m fall in GDP during January’s COVID-19 lockdown will probably be the low point for the year. The bad news is that while the plunges in exports and imports weren’t entirely due …
12th March 2021
Households continued to repay consumer credit, small businesses still borrowing The COVID-19 lockdown pattern of households paying back credit and investing in property but small businesses loading up on debt was repeated in January. And we expect a …
1st March 2021
Earnings growth not as strong as it looks The rise in the unemployment rate in December is another step up on the climb towards the 6.5% peak we expect by the end of the year. But if the government follows the roadmap that it laid out on Monday and …
23rd February 2021
GDP unlikely to bounce back much from January’s lockdown decline The rise in the IHS Markit/CIPS composite activity PMI in February suggests that the economy didn’t deteriorate further after the probable fall in GDP in January triggered by the current …
19th February 2021
Lockdown adds to retailers’ January blues The sharp fall in retail sales in January suggests that the third COVID-19 lockdown hit the economy harder than the second lockdown in November. Retailers may have to endure a few more months of depressed sales, …
Third lockdown leads to highest January borrowing figure on record January’s poor borrowing figures are likely to set the tone for the next few months as the third COVID-19 lockdown keeps many businesses closed. But the Chancellor should resist the urge …