Archive

UK: Retreating To Trend Again

• Residual seasonality shocked the consensus again, this time on the downside, as the spurious surge is replaced with stagnation for the rest of the year in our view.
• The 0.3% m-o-m decline dragged GDP back toward its trend, wiping out the highly supportive statistical carryover effect for Q2, which we now forecast at 0.1% q-o-q.
• BoE forecasts are on track, allowing the MPC’s bias to slow easing to materialise with a pause. We expect cuts to keep being rolled later, with no more delivered in this cycle.

By Philip Rush

UK: Some Workshy Start Looking

• A broadly softer labour market report could easily be used to overstate the fundamental significance. Unemployment’s rise was expected and only 0.2pp on the year.
• Employment is growing and redundancies are low, but when the inactive look for work, long-term unemployment rises. Yet the workshy will struggle to compete for jobs.
• Wage growth slowed despite a 0.5% m-o-m impulse. Costs are rising excessively fast, so the BoE still doesn’t have space to keep easing, and we expect no more rate cuts.

By Philip Rush

Trade Avoidance Easing Shocks

• China’s crashing exports to the US partly reflect avoidance measures, including rerouting through other countries and marking down import prices to subsidiaries.
• Exports to the EU and UK are only trending slightly higher, making little difference to disinflation. ASEAN countries, and especially Vietnam, are seeing trade surge again.
• The US may clamp down on avoidance measures that have eased the shock so far. It could make a painful example of one to encourage concessions from all trade partners.

By Philip Rush

HEM: Better Never Than Late

• Companies are smoothing out volatile trade policies
• Activity remains strong and labour markets are tight
• Underlying price and wage inflation is still too high
• Markets expect cuts to resume later, contrary to history
• The risk of rate hikes in 2026 is widely underappreciated