Chief Economist’s Weekly Brief – If at first you don’t succeed

Last week’s series of votes saw the Withdrawal Agreement defeated for a second time, a no deal exit voted down and an instruction to seek a delay to the Article 50 deadline of 29th March passed. The length of the delay is still unclear. If the Withdrawal Agreement passes this week it could be for a couple of months, if not a much longer deadline is possible.
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Weekly Brief – Crunch time 2.0

UK PM Theresa May’s meaningful vote on the Withdrawal Agreement takes place on Tuesday and so far looks set for another defeat. If the deal is rejected, again, the votes that follow will offer Parliament the chance to go for a no-deal Brexit (almost certain to be rejected) or request an extension of Article 50 (most likely). Such pivotal events are likely to overshadow the Chancellor’s update on the Government’s finances in the Spring Statement.

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Weekly Brief – Concession

Theresa May conceded for the first time Parliament would be given a vote on extending Article 50, or a no deal Brexit if the PM’s “meaningful vote” on March 12th is rejected. The betting markets cut the chances of a no deal exit at the end of March in response and EU figures indicated that some form of delay was inevitable. Meanwhile, MPs grilled the BoE on what it would do in the event of a no-deal.

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Weekly Brief – Shifting sands

The landscape for UK politics is changing. News that seven Labour MPs and four Conservative MPs have defected to form a new Independent Group highlights the current fragmented state of UK politics. PM May delayed the “meaningful” vote on Brexit to March 12th, adding to the uncertain picture for the UK economy, meanwhile the labour market powers ahead.

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UK CPI Inflation set to fall further in 2019

Consumer confidence both nationally and locally is not in a great place. Clearly the ongoing “political recession” isn’t helping the mood either. The good news, however, is that inflationary pressures continue to ease with the headline Consumer Price Index rising by 2.1% y/y in December.  That marks the weakest rate of consumer price inflation in almost two-years. Significantly this welcomed move is coinciding with wages rising at their fastest rate in a decade.

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Falling petrol prices were a key driver behind the latest downward move. Petrol price inflation slowed from 7.6% y/y in November to 1.5% y/y last month. Back in October prices were rising at 11.5%. This trend is set to continue with an easing in energy related inflationary pressures both in utility bills and petrol / diesel costs.

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Significant price cuts to gas and electricity bills are expected to be announced later this month. Similarly, home-heating oil customers should see further significant falls in the coming weeks and months. Petrol and diesel prices have already fallen by around 2% in the first two weeks of January. Food price inflation also slowed dramatically during 2018. Having started the year at 3.9%, annual food price inflation eased to 0.4% in December. What does or doesn’t happen with Brexit (supply disruptions etc) could have a major bearing on food prices in 2019.

In the near-term, CPI inflation looks set to fall below the MPC’s 2% target in January with the annual pace of consumer price rises set to slow to 1.3% / 1.4% by Q4 2019. Against this backdrop and given the growing risks of a global slowdown coupled with the near-term concerns surrounding Brexit, the Bank of England isn’t going to be in a hurry to raise interest rates. 2019 could well see the Monetary Policy Committee sit on its hands and keep its Bank Rate at 0.75%.

Weekly Brief – May’s Brexit deal hangs by a thread

Following the recent Grieve amendment, the chances of Parliament passing PM Theresa May’s Withdrawal Agreement tomorrow look very slim. A rejection would force Mrs May to unveil a Plan B next Monday. An array of outcomes is possible with an increasing chance of Article 50 being extended.

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New orders stagnate in December

Today sees the release of December data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by IHS Markit – pointed to no change in new orders at the end of 2018. Meanwhile, business activity and employment continued to rise solidly, albeit at weaker rates than in November. Both input costs and output prices increased at marked rates again, but inflationary pressures showed some signs of easing at the end of the year.

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