Archive

March 28, 2024
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UK Wage Wealth is an Inflationary Illusion

  • Nominal disposable income continues to surge amid widespread enormous pay rises. Unmatched by productivity, the nominal boost is eroded by inflation to real stagnation.
  • The regime of high nominal increases nonetheless inflates away the debt stock, helping sustain affordability despite forceful interest rate increases.
  • An inflationary reduction in debt burdens is not real wealth. The UK’s net worth is crashing to record negatives as corporates and households suffer post-pandemic.

By Philip Rush


March 25, 2024
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Oil: A Fine Line

  • The IEA’s recent shift in its 2024 supply/demand forecast closer to Opec’s is premised on relatively bullish estimates for the Chinese and US economies coupled with continued Opec+ discipline. None of these is a given.

By Alastair Newton


March 21, 2024
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BoE Hawks Read the Writing on the Wall

  • The BoE held the Bank rate at 5.25%, with only one dissent for a cut as the two hawks stopped pushing for a hike that was not going to happen, given broad resistance.
  • An extended period of restrictive policy is still envisaged, with persistent inflationary pressures rather than the spot CPI rate guiding when rate cuts begin.
  • Wage and service inflation is not seen returning to target sufficiently rapidly yet, and we expect that problem to persist, leaving our call for the first cut back in Feb-25.

By Philip Rush


March 20, 2024
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UK: Sticky Services Persist in Feb-24

  • UK CPI inflation slowed 0.1pp further than expected to 3.4% in February amid soft goods prices, but services prices were strong again by only easing to 6.1%.
  • Underlying inflation pressures remain sticky, with the median inflationary impulse stuck close to 3%. These data remain inconsistent with a sustainable return to the 2% target.
  • Proximity to the target relies upon the temporary drag from falling energy prices and is not a reason to cut. Wage growth is too high, fuelling resilience that postpones cuts.

By Philip Rush