Chief Economist’s Weekly Briefing – A Rocky Road

Last week interest rates were hiked by the largest amount since the Bank of England gained independence in 1997. But it was the further hike in the estimated inflation peak, with it set to remain higher for longer, as well as a forecast recession that ultimately grabbed the headlines. Conditions outside the UK are little better, confidence in the Euro area is dropping and Chinese PMIs are contracting as the impetus from reopening fades.

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Chief Economist’s Weekly Briefing – Toxic Mixture

Central bankers are raising rates at the fastest pace since 1980s, with the Fed last week raising rates by 0.75 ppts. Will the Bank of England follow suit on Thursday? Members will need to navigate a tight trade-off between growth and inflation. Given the latter remains at eye-watering levels, a rate hike is very much on the cards. However, the question remains whether the BoE will stick to a gradual approach or will step up the pace of its tightening cycle following the lead of other central banks.

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Chief Economist’s Weekly Briefing – Peak after peak

At this point upside surprises in inflation rate occur with such frequency that “surprise” is probably the wrong word for them. Inflation in the UK rose for a ninth month in a row in June and was the highest among G7 countries, while with another hefty rise in the energy price cap to come, the inflation peak is still some way off. Meanwhile PMI data across the UK, Eurozone and US all point to slowing growth momentum.

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Chief Economist’s Weekly Briefing – Feeling the heat

The UK reported better than expected growth in May. However, the elephant in the room is stubborn inflation. Americans are already feeling the heat, as inflation hit a fresh 40-year high last week. Surging price pressures and a darkening economic outlook for Europe is helping drive down the value of the euro, which briefly touched parity with the dollar for the first time in 20 years. Meanwhile the Bank of England is signal rate hikes might quicken!

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Chief Economist’s Weekly Briefing – A challenging inheritance

After days of drama last week, the UK will soon have a new prime minister. The new administration will inherit stagnation in productivity, falling real incomes plus soaring inflation. In the meantime, the wind has changed for many commodity prices, which have slumped dramatically partially due to recession fears, while Europe is preparing for Russian gas to be cut off this winter.  

Prime Minister’s Office in 10 Downing Street in London
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Chief Economist’s Weekly Briefing – The double whammy

Central bankers adopted a more hawkish tone at an industry get together last week, warning that the era of low rates and modest inflation may be at an end following the double whammy of Russia’s invasion of Ukraine and the Covid shock. Gloom still dominates global headlines: US consumer confidence deteriorated amidst inflationary concerns, while price pressures continue to build in the Eurozone.

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Chief Economist’s Weekly Briefing – Summer of Discontent

Soaring inflation cast a shadow over business sentiment. Fresh PMIs released last week reinforce the view that UK economy is flatlining as growing uncertainty about the rising cost of living eats into consumer spending intentions. The squeeze on households’ real incomes is pushing up wage demands with rail workers on strike last week. On the pandemic front UK is experiencing another surge in infection rates.

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Chief Economist’s Weekly Briefing – Central Banking Time 

Monetary policy was at the forefront last week as central banks across the world took a hawkish shift in their battle again inflation. We had the 5th Bank of England hike with no signs of stopping, a US Federal reserve rise of 75 bps – biggest in almost 3 decades – and the European Central Bank announced an end to stimulus measures and expected to raise rates next month.

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Chief Economist’s Weekly Briefing – The Stagnation Nation

The OECD’s updated outlook revealed that we are on course to be the stagnation nation, as new forecasts suggested the UK would experience the weakest growth in the G20 outside Russia next year. Why? Well, a combination of factors – high inflation, rising rates and increasing taxes. In the meantime, a further rate hike from the Bank of England is anticipated later this week, even with a weaker GDP figure this morning. Meanwhile Brexit afficionados wait with bated breath on the PM’s plans to scrap parts of the NI Protocol.  

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Business activity falls for the first time in 14 months

Today sees the release of May data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by S&P Global – signalled reductions in output and new orders as steep inflationary pressures hit demand. Indeed, output price inflation was at a record high. The impact of price pressures also hit business expectations, which turned negative. On a more positive note, employment continued to rise.

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