Archive

February 20, 2024
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2% is Neither Necessary Nor Sufficient

  • UK CPI inflation is slowing, but low 6-month and 3m-o-3m growth rates don’t provide any helpful signal at the 2yr horizon. Relevant measures remain above the 2% target.
  • Falling energy prices are depressing spot inflation closer to target this summer. Without sustainable reasons, proximity to 2% is not a sufficient condition for rate cuts.
  • The BoE could clarify its reaction function with threshold guidance of what would be necessary to consider cuts. It probably won’t do this, despite the benefits.

By Philip Rush

February 19, 2024
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UK Politics: The Right Bites

  • Following Reform UK’s strong performance in last week’s by-elections, the 29 February Rochdale by-election will create pressure for Rishi Sunak from within his party to shift rightwards or step down.

By Alastair Newton

February 16, 2024
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UK: Retail Returns to Reality in Jan-24

  • UK retail sales fully recovered in Jan-24 from their Dec-23 crash, like we forecast. However, the 3.4% surge was double the consensus expectation.
  • We had branded the previous fall as a false trend break and identified it as a seasonal adjustment issue around Black Friday rather than a fundamental problem.
  • Trading between October and January was the best since 2015, with NSA and SA data back in agreement. GDP will also enjoy payback from this spurious volatility.

By Philip Rush

February 15, 2024
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UK Stagnation is Technically a Recession

  • UK GDP disappointed as revisions meant December’s surprisingly modest decline was consistent with a much weaker Q4, falling by 0.3% q-o-q after Q3’s 0.1% contraction.
  • Although GDP is technically in recession, that definition is too easy to meet for a stagnant economy. The macro regime is not breaking into a traditional recession.
  • Surveys suggest that GDP is already rebounding without the dip loosening the labour market. In our view, excess demand and inflation remain inconsistent with rate cuts.

By Philip Rush

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