The heat continues to come out of the UK economy. Lending is tepid and the housing market is subdued. Meanwhile the labour market also continues to cool, suggesting that the Bank of England’s rate tightening is nearing its end. Things are not too different in the Eurozone and US, while China grapples with faltering growth.
Continue reading
Good news on the UK economy remains thin on the ground. Economic output is flat-lining, the labour market is cooling, and credit conditions are set to tighten. Nevertheless, the Bank of England remains focused on taming inflation, even if that means higher re-mortgage costs for households. Growth in the second half will be contingent on how aggressively households rein in spending. A drop in energy bills from this month should offer some solace, but the rest is left to be seen.
Continue reading
After an economic shock, we tend to closely watch whether a particular indicator has returned to its pre-shock levels over the months and years that follow. Since the pandemic occurred economists and commentators have been asking “are we there yet?” Have we returned to pre-pandemic levels? Depending on the frequency of the specific statistic (monthly / quarterly), the benchmark has been pre-March 2020. For quarterly data, Q4 2019 is invariably the timestamp to compare economic progress.
Continue readingThis week’s interest rate decision from the Bank of England will be the first since the September “mini-budget” announcement unleashed a period of political and market turmoil. Markets and economists are counting on a 75 bps hike—the largest since 1989, and a quantum the ECB chose to adjust its benchmark rate just last week. But the real pain for the MPC is forecasting the economic and inflation outlook amid the current uncertainty around the new PM’s pending fiscal strategy.
We’ve become well used to price hikes with rampant inflation, but last month was marked by tax hikes with the increase in National Insurance Contributions hitting the pockets of many employees as well as employers. The attention now though is very firmly on interest rate hikes with the Federal Reserve having just delivered its first 0.5% rate increase in 22 years with more to come as the Fed seeks to tame inflation which is at 40-year-high.
A sharp slowdown in economic activity adds to calls for the Bank of England to pause before raising interest rates.
While two of the SpaceX rocket boosters landed gently back on terra firma it was a much more turbulent period in the markets. US equities had their worst week in two years and volatility woke from its slumber. The Bank of England also gave the markets a little shake, indicating a rate hike in May is more likely than previously expected. Continue reading
Over two months have passed since the UK voted to leave the EU. Since then, the media and economists have focussed on the incoming economic data to assess the impact. Continue reading
The first full post-referendum week was nothing if not eventful. Financial markets were volatile and uncertainty about economic policy has jumped. We await tomorrow’s publication of the Financial Stability Report and yet another opportunity for the Bank of England’s policy makers to offer their views. Continue reading
The UK was sending out some mixed signals on growth last week as manufacturing and construction went in different directions. The best news came from the Eurozone, for a change, whilst the Fed continues to wait.
