UK Publications
Below is a list of our UK Publications for the last 5 months. If you are looking for reports older than 5 months please email info@pantheonmacro.com, or contact your account rep
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Daily Monitor Chartbook
THE INFLATION OUTLOOK IS IMPROVING...
- …BUT A RETURN SUSTAINABLY TO 2% WILL BE PROTRACTED
- Markets need to prepare for major changes to the MPC’s flagship publications, the MPR and minutes…
- …Chief Economist Pill outlined the changes, which amount to downplaying the central forecasts further.
- A manifesto-breaking income-tax hike is more likely, with rumours of a larger OBR productivity downgrade.
- Healthy credit flows imply businesses and consumers remain confident ahead of the Budget…
- …and mortgage approvals rising to a nine-month high suggests the housing market is still solid.
- Rumours of a larger productivity downgrade by the OBR make an income-tax hike more likely.
- We expect the MPC to vote six-to-three to keep Bank Rate on hold at its meeting on November 6.
- The vote is a close call, but we see the MPC teeing up a cut in December with tweaks to guidance.
- The inflation outlook is better but still not great, with plenty of signals warranting caution.
- Solid activity data suggest that fundamental demand in the housing market is holding firm…
- ...but house price inflation remains weak, because of April’s stamp-duty hike and worries about the Budget.
- So, we retain our call for house prices to rise by just 2.5% year-over-year in 2025.
- Soft inflation data and the prospect of greater fiscal headroom mean we cut our gilt-yield forecasts.
- We now expect the two-year gilt yield to end the year at 3.80%, and the 10-year at 4.55%.
- All of the good news is priced into yields, increasing the risk of a post-Budget market disappointment.
- Plenty of small caveats suggest we treat the downside inflation surprise with a little caution…
- ...But the dovish news was too widespread to ignore, so we cut our forecasts and see a December rate cut.
- We still think the MPC will skip a November cut, with inflation nearly double its target.
- The ONS revised down borrowing by £4.2B, as an error in the collection of VAT receipts was corrected…
- …But borrowing is still £7.2B higher than the OBR forecast for the first half of fiscal year 2025/26.
We expect £33B of tax hikes and spending cuts in the Budget, back-loaded to 2029/30.
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- We have thrown in the towel and include in our forecasts a cut to energy bills in November’s Budget.
- All told, we lower our inflation forecast by 16bp for one year from April 2026.
- We struggle to see the Chancellor freezing fuel duty completely though, given the £5B-per-year cost.
- GDP rose by 0.1% month-to-month in August, after falling by a downwardly revised 0.1% in July.
- GDP growth will match our call of 0.2% quarter-to-quarter in Q3, below the MPC’s forecast, 0.4%.
- Underlying GDP growth has slowed due to Budget uncertainty but is still close to potential.
- The next forecast round from the OBR will likely show the Chancellor’s headroom has become a £25B hole.
- We think the government will target headroom of £20B, requiring £35B in tax hikes and spending cuts.
- Stealth, sin, property and pensions taxes will fill most of the black hole in our view.
- MPC doves will seize on weaker-than-expected pay growth, so we now expect a rate cut in February 2026.
- But the underlying story is of stabilising jobs, which will limit the build-up of further slack.
- Accordingly, we think the MPC will be limited to only one more rate cut over the next year.
- We expect CPI inflation to accelerate to 4.0% in September from 3.8% in August.
- Motor fuel and airfare base effects should together add 23bp to inflation compared to August.
- Services inflation is proving sticky, so we expect headline inflation to slow only to 3.8% by December.
- We expect the OBR to lower potential GDP growth by 0.1pp per year in the November Budget forecasts.
- Only a small downgrade is needed after payroll-based productivity growth far exceeded OBR forecasts.
- The fiscal watchdog should also avoid becoming unduly pessimistic about a hard-to-forecast variable.
- We expect GDP to be unchanged in August, as an erratic fall in mining output drags on growth…
- …Services activity likely saved GDP from a fall, with rebounds in large sub-sectors boosting growth.
- We think that underlying economic activity remains firm, which will keep the MPC on hold this year.
- We expect the ONS to publish an initial estimate of an 8K month-to-month payrolls fall in September.
- The unemployment rate should hold at 4.7%, suggesting the labour market is loosening only slowly.
- We look for a strong 0.4% month-to-month gain in private sector ex-bonus AWE in August.
- We expect CPI inflation to rise to 4.0%, almost rounding to 4.1%, in September, from 3.8% in August.
- A motor fuels base effect will add 10bp to inflation compared to August, and core CPI another 14bp.
- The BRC Shop Price Index points to a jump in clothes inflation, while used-car price inflation picked up.
BUILDING FISCAL RISKS THE MAIN CHALLENGE...
- …TO OUR FORECAST FOR THE MPC TO HOLD BANK RATE
- Bank of England revises data without explanation, shaking confidence in their numbers.
- Revised DMP data show job falls easing, spare capacity stable and price pressures stubborn.
- Underlying disinflation has ceased according to the DMP so the MPC will have to stay cautious.
- Gilt auctions are still well supported, and financial conditions are orderly, despite high uncertainty…
- ...but yields will remain high as the MPC stays on hold and markets demand a premium for political risk.
- We expect 10-year and 30-year gilt yields to end 2025 at their current rates of 4.7% and 5.5%, respectively.
