- February's pick-up in CPI inflation was driven partly by
a jump in food prices, linked to bad weather in Europe...
- ...The MPC's measure of core services CPI inflation
rose too, but was lower than it expected last month.
- The near-term outlook for CPI inflation has improved
since the MPC last met, thanks to lower energy prices.
Samuel Tombs (UK Economist)U.K.
- In one line: Producers are slowing price rises in the face of weak demand.
Samuel Tombs (UK Economist)U.K.
- In one line: The downturn is gathering momentum.
Samuel Tombs (UK Economist)U.K.
- In one line: Core services CPI inflation is still tracking a lower path than the MPC anticipated.
Samuel Tombs (UK Economist)U.K.
- The OBR's productivity growth forecast still is too upbeat; we think GDP in 27/28 will be 1.6% lower than it expects.
- While slower growth points to lower interest rates than the OBR assumes, borrowing would be higher on net.
- Plans for a fiscal consolidation of nearly 4% of GDP aren't credible, given past U-turns and the upcoming election.
Samuel Tombs (UK Economist)U.K.
- In one line: OBR’s full-year borrowing forecast is in the right ball park, despite February's jump.
Samuel Tombs (UK Economist)U.K.
- Short-dated gilts now offer a higher return than bank deposits, with a 100% guarantee from the government.
- CFOs used to park a higher share of their cash in gilts and money market funds; a rebalancing now looks likely.
- Deposit rates will rise unless deposit insurance become more comprehensive, raising the cost of new borrowing.
Samuel Tombs (UK Economist)U.K.
- Financial conditions have tightened, reinforcing the case made by economic data for the MPC to pause.
- Both core CPI inflation and private-sector wages have surprised the MPC's expectations to the downside.
- Most of the Budget measures focussed on boosting potential supply, while inflation expectations have fallen.
Samuel Tombs (UK Economist)U.K.
- U.K. banks in aggregate are not highly exposed to a decline in the value of fixed-income securities, unlike SVB.
- U.K. deposit insurance looks inadequate after the Covid savings surge, but could be increased quickly in a crisis.
- Redundancy notifications now are tracking a higher path than in early 2021; employment is flatlining at best.
Samuel Tombs (UK Economist)U.K.
- The Chancellor wisely made supply-side reforms, rather than demand stimulus, the centrepiece of this Budget.
- Even the small measures to support households’ incomes will lead to a faster-than-otherwise fall in inflation.
- The MPC, therefore, needn’t lean against the slight loosening of the fiscal plans.
Samuel Tombs (UK Economist)U.K.
- In one line: No need for the MPC to counter fiscal easing focussed on supply-side reforms.
Samuel Tombs (UK Economist)U.K.
- Private-sector pay rose at a month-to-month annualised rate of just 2.0% in December and 1.2% in January.
- The recent slowdown has been echoed by the PAYE data, and can’t be explained by recent strike action.
- Firms now report recruiting is no tougher than usual; inactive people wanting to work are more numerous.
Samuel Tombs (UK Economist)U.K.
- In one line: The clear slowdown in wage growth strengthens the case for an MPC pause.
Samuel Tombs (UK Economist)U.K.
- We think CPI inflation fell to 9.9% in February, from 10.1% in January, matching the MPC’s forecast.
- A surge in the core CPI, after January’s tiny rise, is unlikely; fewer items than usual were temporarily discounted.
- BRC data point to a modest rise in core goods prices in February; services price indicators have eased too.
Samuel Tombs (UK Economist)U.K.
- January’s rise in GDP was driven by rebounds in three sectors that were disrupted in December.
- The level of GDP was 0.04% below its Q4 average; a shallow recession remains our base case.
- Business surveys picked up in February, but they likely overstate GDP growth, given the public sector strikes.
Samuel Tombs (UK Economist)U.K.
- In one line: Quarterly GDP still likely to drop in Q1, despite January’s rebound.
Samuel Tombs (UK Economist)U.K.
- House purchase demand still is weaker than supply, maintaining the downward pressure on house prices.
- Mortgage rates likely will rise over the next month, worsening affordability issues.
- Expectations of further price falls are widespread; many potential buyers will wait for larger discounts.
Samuel Tombs (UK Economist)U.K.
- Surveys point to broadly flat employment and a substantial improvement in labour availability since mid-2022.
- December's slow month-to-month rise in private-sector wages likely was partly due to short-lived strikes...
- ...But on balance, surveys suggest that wage increases have slowed a little since last autumn.
Samuel Tombs (UK Economist)U.K.
