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February 13, 2025
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UK: GDP Rebounds From Statistical Low

  • GDP defied dovish expectations by surging 0.4% m-o-m, flipping the expected sign on Q4 to grow by 0.1% q-o-q amid broadly positive performances across industry and services.
  • We called November the statistical bottom amid residual seasonality, which is turning higher into what should be a more resilient H1 again. That call remains on track.
  • Statistical noise misled dovish rate views into seeing a spurious fundamental weakness. A lack of follow-through should allow cuts to end after a final one in May.

By Philip Rush

January 29, 2025
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AI: Attack Of The Clones

  • AI investors were shocked by China’s DeepSeek successfully matching the performance of OpenAI’s GP4-o1 at a fraction of the build cost and despite export restrictions.
  • Innovating a more productive use of capital does not negate the potential gains from increasing processing power. Either way benefits the economy with faster AI progress.
  • Foundation model IP needs better protection against the attack of cloning distillation techniques to reap a return on investment while pushing the performance frontier.

By Philip Rush

January 21, 2025
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UK Pay And Participation Are Rising

  • A renewed rise in the UK unemployment rate took it to 4.4% despite employment hitting record highs. Participation among older people has reversed much of its pandemic fall.
  • The underlying UR trend also increased, making this change look genuine. Nonetheless, the past two similar occasions proved extremes, with the UR falling a few months later.
  • Rapid pay growth might have encouraged labour force participation. The direct inflation effect should dominate the second-order slack story, but the BoE will probably cut.

By Philip Rush

January 16, 2025
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UK: GDP Scrapes Statistical Bottom

  • UK GDP disappointed the consensus again by only rebounding 0.1% m-o-m in November, continuing the stagnation since the election was called and risking a Q4 contraction.
  • The services PMI’s December upturn suggests the recovery could extend. That would also be consistent with residual seasonality, which has been closely followed in 2024.
  • Recent weakness will help the BoE cut again in February. Reversing this dynamic could make it the last, but we expect another in May before hikes return in 2026.

By Philip Rush

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