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If you haven’t started your Christmas shopping, you may not be alone. Both the CBI Distributive Trades Survey and the CHAPS spending data point to a fall in retail sales volumes in November. The BRC/KPMG Retail Sales Monitor, which has a somewhat …
9th December 2022
Shift down from 75bps hike in November to 50bps hike in December MPC starting to think more about the level of rates rather than the pace of rate hikes We think rates will rise to a peak of 4.50%, before being cut sharply in 2024 A shift from the 75 …
8th December 2022
This week’s data releases showed that higher interest rates are starting to influence the economy. This means that at some point the Bank of England will have to start to think more about the appropriate level of interest rates rather than the pace of …
2nd December 2022
There is a good chance that CPI inflation has peaked or will peak before the end of the year. There are even some signs that inflation is becoming less persistent. This may contribute to the Bank of England slowing the pace of rate hikes from 75 basis …
Although we agree with the markets that the Bank of England will be patient and won’t pivot from raising interest rates to actually cutting interest rates until 2024, we think that fading inflation will force the Bank to cut rates quicker than investors …
30th November 2022
Higher interest rates beginning to influence the economy October’s money and credit figures highlight how higher interest rates are starting to influence the economy. Higher interest rates are weakening the demand for credit, especially for mortgages, …
29th November 2022
Higher interest rates are weighing on credit and attracting savings October’s money and credit figures reveal further signs that households continue to remain cautious and higher interest rates are starting to weigh on the economy. The £0.8bn rise in …
The most eye-catching statistic published this week was the net migration into the UK of 504,000 people in the year to June 2022. That’s a record high. It continued the recent trend of net inflows from the non-EU and net outflows to the EU. And it …
25th November 2022
The Treasury has started to make payments to the Bank of England’s Asset Purchase Facility (APF) to cover the losses it has racked up because of the Bank of England’s gilt purchases. While this won’t force the Chancellor to tighten fiscal policy …
With fiscal policy no longer expected to be ultra-loose and some signs emerging that domestic price pressures will ease further ahead, we no longer expect the Bank of England to raise interest rates to a peak of 5.00%. Our new forecast of an increase …
23rd November 2022
PMIs suggest we’re already in recession While the composite flash PMI improved marginally in November, it stayed firmly below the no-change level of 50.0, which is consistent with our view that the economy is already in recession. However, with domestic …
PMIs suggest we’re already in recession While the composite flash PMI improved marginally in November, it stayed firmly below the no-change level of 50.0, which is consistent with our view that the economy is probably already in recession. The composite …
Energy price support puts borrowing back on upward trend October’s public finances figures showed that government borrowing is no longer coming in below last year’s monthly totals. And the combination of the government’s energy price support and …
22nd November 2022
Energy price support puts borrowing back on upward trend October’s public finances figures showed that government borrowing is no longer coming in below last year’s monthly totals. And the combination of the government’s energy price support and pressures …
As the dust settles on this week’s Autumn Statement, we take a step back and answer three key questions. (Clients can catch up on our detailed analysis and our Drop In webinar following Thursday’s fiscal event here and here .) With the economy entering …
18th November 2022
Only a temporary halt to the downward path The 0.6% m/m rise in retail sales volumes was larger than both we (0.0% m/m) and the consensus (+0.2% m/m) had expected. Sales volumes were probably supported by the reversal of bank holiday effects in October. …
Boost from reversal of bank holiday effects won’t last The 0.6% m/m rise in retail sales volumes (consensus +0.2% m/m, CE 0.0% m/m) was probably supported by the reversal of bank holiday effects in October. But, given that the high inflation that weighed …
In his Autumn Statement, the Chancellor, Jeremy Hunt, appears to have pulled off the tricky task of reassuring the financial markets of the government’s fiscal discipline while also managing not to deepen the recession. Our economic forecasts suggest he …
17th November 2022
Chancellor satisfies the markets and helps the economy when it needs it The £55bn (2.0% of GDP) tightening in fiscal policy announced today by the Chancellor, Jeremy Hunt, appears to have been enough to satisfy the financial markets. What’s more, he’s …
This checklist helps clients keep track of the key economic and public finances forecasts announced during the Chancellor’s Autumn Statement at 11.30am on Thursday 17 th November. We will send a Rapid Response shortly after the speech, we are hosting a …
16th November 2022
Inflation may have peaked, but battle not yet won It’s possible that the big leap in CPI inflation from 10.1% in September to a new 40-year high of 11.1% in October will mark the peak. But core inflation may yet rise further, which is why we think the …
CPI inflation may have peaked, but inflation battle is not yet won It’s possible that the big leap in CPI inflation from 10.1% in September to a new 40-year high of 11.1% in October (consensus 10.7%, BoE 10.9%) will mark the peak. But core inflation may …
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
The big fiscal tightening set to be unveiled at the Autumn Statement on 17 th November is coming at a time when the economy is probably already in recession. And the fiscal consolidation, rumoured to be worth a total of £54bn (1.9% of GDP), could risk …
11th 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 …
Recession begins and not just because of the extra bank holiday Although at least half of the 0.6% m/m decline in GDP in September (consensus -0.4% m/m, CE -0.5% m/m) and the 0.2% q/q decline in Q3 as a whole (consensus and BoE forecasts -0.5% q/q) was …
While the risk premium that pushed gilt yields up and the pound down after the mini-budget has mostly been reversed under the stewardship of Sunak and Hunt, the fear that the markets will baulk at any fiscal indiscipline means that the Chancellor will …
10th November 2022
Chief UK Economist Paul Dales and Jonas Goltermann, a senior economist from our Global Markets team, held a client briefing shortly after the Chancellor’s 17th November statement, to discuss his final policy choices and their implications for the UK …
We’ll be discussing the implications for the economy and the financial markets of the Autumn Statement in a 20-minute online briefing at 4pm GMT on 17 th November. (Register here .) In his Autumn Statement on 17 th November the Chancellor, Jeremy Hunt, …
This week the Bank of England displayed the most extreme example of a “dovish hike” that we can recall. The hike bit; the 75 basis point rise in interest rates was the largest rise since 1992; it meant that rates have risen in each of the past eight …
4th November 2022
Although the Monetary Policy Committee (MPC) raised interest rates today by 75 basis points (bps), from 2.25% to a 14-year high of 3.00%, it sent the strongest signal yet that it thinks rates won’t need to rise much above 4.00%. But with price/wage …
3rd November 2022
Dovish tilt, but rates may still rise to 5.00% Although the Monetary Policy Committee (MPC) raised interest rates today by 75bps, from 2.25% to a 14-year high of 3.00% (consensus 3.00%), it sent a strong signal that it is unlikely to raise rates to the …
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
Economists from our UK Economics team held a briefing ahead of the MPC’s November meeting to discuss why we think that rates will rise further than most analysts are expecting and the conditions that would be needed for the Bank to shift to a slower pace …
31st October 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 …
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 …
The reports that the Chancellor, Jeremy Hunt, will unveil in his Autumn Statement on 17 th November a fiscal tightening of up to £50bn by 2026/27 (1.7% of GDP) suggest that after a period in which fiscal policy has provided the economy with support, it is …
28th October 2022
Rising price/wage expectations will prompt the MPC to hike rates aggressively on Thursday It’s almost 50-50 between a 75bps and 100bps hike, but we are going for 100bps Our forecast that rates will peak at 5.00% remains higher than the consensus …
27th October 2022
The reversal of Truss/Kwarteng’s fiscal policies and Rishi Sunak’s appointment as the UK’s new Prime Minister has ushered in a period of calm in UK financial markets after the recent storm. Indeed, much of the extra political risk premia on gilts that …
26th 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
Whichever way events unfold over the next few days, it seems clear the next Prime Minister (Rishi Sunak or Penny Mordaunt) will have to work hard to restore credibility in the eyes of the markets by revealing measures to fill the hole in the public …
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 …
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 …
We do not yet know which of the three PM hopefuls (Boris Johnson, Rishi Sunak, Penny Mordaunt who have attracted early backing from Conservative MPs) will replace Liz Truss. The candidates that gain more than 100 nominations from MPs will be whittled …
21st 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 …
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 …