- We expect GDP to rise 0.2% month-to-month in October, despite a fall in retail sales.
- Professional services should rebound, and a jump in GP appointments signals strong healthcare growth.
- We still expect GDP to grow 0.3% quarter-to-quarter in Q4, but risks lie to the downside.
Rob Wood (Chief UK Economist)UK
- In one line: The PMI falls, but it will rebound after the Budget.
Rob Wood (Chief UK Economist)UK
- In one line: The Budget hit sentiment, but we take some encouragement from the large upward revision to the PMI.
Rob Wood (Chief UK Economist)UK
- In one line: S Payroll tax hikes boost inflation more than they cut wages.
Rob Wood (Chief UK Economist)UK
- In one line: The Budget keeps construction growth solid for now, but boosts inflation pressure and cuts optimism.
Rob Wood (Chief UK Economist)UK
- In one line: Signs that private demand is turning.
Rob Wood (Chief UK Economist)UK
- The PMI fell to a 13-month low in November as businesses worried about taxes and trade wars.
- But take the implications for GDP growth with a pinch of salt; the PMI overreacts to political events.
- The MPC will look through the November PMI and stick to its ‘gradual rate cut’ message.
Rob Wood (Chief UK Economist)UK
Stronger population growth boosts official LFS employment estimates by 402K in Q2…
…Cutting productivity, as well as raising unit wage costs and therefore estimated inflation pressure.
Ignore the drop in November BRC retail sales as the data are distorted by the timing of Black Friday.
Rob Wood (Chief UK Economist)UK
- In one line: Late Black Friday cuts retail sales growth.
Rob Wood (Chief UK Economist)UK
- Tobacco duties and base effects will push up CPI inflation to 2.6% in November, from 2.3% in October.
- We expect energy and food to add 14bp to inflation, and core goods another 15bp, compared to October.
- CPI inflation 0.2pp higher than the MPC’s forecastwould rule out a December rate cut.
Rob Wood (Chief UK Economist)UK
- In one line: Budget and geopolitics hit manufacturing sentiment in November.
Rob Wood (Chief UK Economist)UK
- In one line: House prices bounce back after pre-Budget pause.
Rob Wood (Chief UK Economist)UK
- In one line: Tax hike fears lead households to dispose of assets and rush to complete house purchases.
Rob Wood (Chief UK Economist)UK
MARKET REPRICES FOR FEWER RATE CUTS...
- ...AND WE NOW SEE HOUSE PRICES RISING BY 4% IN DECEMBER
Rob Wood (Chief UK Economist)UK
- We trim our Q4 growth forecast to 0.3% quarter-to-quarter, after weak GDP and the fall in the PMI.
- Unemployment is likely trending up gradually and wage growth is slowing.
- But services inflation and wage growth remain too strong, so the MPC will cut only gradually.
Rob Wood (Chief UK Economist)UK
- We cut our house price inflation forecast to 4.0% year-over-year in December 2024, from 4.5%...
- ...as higher market interest rate expectations mean mortgage rates will stabilise at current levels.
- The LFS reweighting will raise employment levels but have only a small effect on the employment rate.
Rob Wood (Chief UK Economist)UK
- A rash of MPC-speak in the past two weeks suggests broad agreement on “gradual” rate cuts.
- The MPC will wait to see pay settlements in the New Year before cutting again and firming guidance.
- We expect three 25bp cuts in 2025, with risk biased to more as a cautious MPC may need to catch up.
Rob Wood (Chief UK Economist)UK
REBOUNDING GROWTH AND SLOWLY EASING WAGES
- ...THE MPC WILL CUT IN NOVEMBER AND THREE TIMES IN 2025
Rob Wood (Chief UK Economist)UK
- The BRC Shop Price Index suggests slightly slower food inflation but a jump in core goods in November.
- So we expect headline CPI inflation to rise to 2.6% year-over-year in November from 2.3% in October.
- The CBI retailing survey is useless, other data sources are stronger, retail sales will rebound.
Rob Wood (Chief UK Economist)UK
- Business and public services output drove the H1 GDP surge, and Q3 slowdown.
- Idiosyncratic factors and erratic professional services data explain weaker Q3 business services growth.
- Professional services should help Q4 GDP growth improve as those erratic factors unwind.
Rob Wood (Chief UK Economist)UK
