August 12, 2022
2022-08-12 gdp_head.png

UK: Holidays Reduce Output in Jun-22

  • UK GDP contracted by 0.6% m-o-m in June after a downwardly revised 0.4% growth in May, which appears to confirm the distortions from the Diamond Jubilee holidays.
  • Some positive payback should occur in July as the output level normalises with the number of working days. However, GDP looks to be trending barely better than flat.
  • Aggressively increased interest rates will compound inflation’s squeeze on the cycle, raising the risk of a needless recession when pressures are burning out anyway.

By Philip Rush

August 04, 2022
2022-08-04 boe_head.png

BoE: Market Tail Wags Policy Dog

  • The BoE hiked by 50bps to 1.75%, in line with market and consensus expectations, but contrary to our view that a lack of increased second round effects would mean 25bps.
  • A reassessment of existing pressures proved more important than the downside news and state-dependent guidance that was needlessly issued and broken.
  • We now ignore retained guidance about the reaction function and focus on the BoE’s 2yr inflation forecast. GBP pressure will probably underly another 50bp if it occurs.

By Philip Rush

August 03, 2022
2022-08-03 AN_head.png

EA: Solidarity Comes Second

  • Italy’s right-wing parties should note that what Germans widely perceive as a lack of EU solidarity in last week’s gas deal will likely spill over into Berlin’s demands for stiff conditionality attached to support from the ECB’s Debt Transmission Instrument.

By Alastair Newton