Archive

April 11, 2025
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UK: GDP Seasonal Surge Before Slowing

  • Fundamental causes should not be assigned to UK GDP surging far beyond consensus expectations again in February, despite the notability of Q1 growth tracking 0.7% q-o-q.
  • Residual seasonality has dominated the post-pandemic growth profile, and the recent resilience merely matches it. Stagnation for the rest of the year is the consequence.
  • Disruptive and volatile US trade policy will also depress the underlying economic trend beneath the spurious seasonals. We now bake both more fully into our modal forecasts.

By Philip Rush

April 08, 2025
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UK: Spillover effects from US tariffs

  • The UK output destroyed by reciprocal US tariffs is only partly due to the direct impact of the new 10% rate (worth ~0.2% of GDP) and generally weaker US prospects (0.1%).
  • Global GDP growth is depressed by this policy, indirectly destroying demand for UK exports from elsewhere (0.2%), especially if countries harm themselves by retaliating.
  • An overall 0.6% GDP hit has two-sided risks and a skew lowered by likely negotiations. Fears of items dumping into the UK market are overblown excuses for protectionism.

By Philip Rush

March 24, 2025
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PMI Spring Vibe Shifts

  • A resurgence in the US and UK services PMIs seems inconsistent with renewed dovish pricing that assumes activity weakness. Vibes may be throwing surveys beyond reality.
  • Labour demand growth seems to be trending close to supply, signalling monetary conditions close to neutral. That is broadly the story across a broad basket of countries.
  • We still believe rate pricing is too dovish for the Fed and, to a lesser extent, the BoE. Noisy survey vibes and spurious assumptions of tightness are likely to be misleading.

By Philip Rush

March 20, 2025
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UK: Tight Jobs Market Persists Into 2025

  • Unemployment remained at 4.4% in January amid rapid employment growth. Recent data suggest that the unemployment rate will likely decline over the next few months.
  • Regular wage growth adhered to its 0.4% m-o-m trend. The headline is near 6%, leaving no progress over the past year. Financial sector bonuses weigh temporarily on total pay.
  • Doves can temporarily dismiss this inconvenient resilience as unreliable noise, but the obvious risk is that it’s genuine and monetary stimulus has already become excessive.

By Philip Rush

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