Pantheon Macroeconomics

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U.K. Publications

Below is a list of our U.K. Publications for the last 6 months. If you are looking for reports older than 6 months please email info@pantheonmacro.com, or contact your account rep

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Investment

13 May 2022 Brisk Quarterly GDP Growth Masks a Slowdown during Q1

Q1 GDP grew faster in the U.K. than overseas because consumers were shielded from higher energy prices.

Monthly data show growth slowed during Q1; falling retail sales were more than just a consumer rotation.

Falling real incomes, declining health spending and the extra bank holiday will reduce GDP in Q2.

Samuel Tombs (UK Economist)U.K.

1 Apr 2022 Don't Mistake the Swift Recovery in GDP for Private Sector Strength

  • GDP has returned to its pre-recession level faster than after the four previous downturns...
  • ...But this strength reflects high government spending; "private-sector" GDP was nearly 3% below its peak.
  • Sub-par growth in households’ financial wealth adds to the list of reasons to expect little dis-saving ahead.

Samuel Tombs (UK Economist)U.K.

24 Mar 2022 Incomes Still Set to be Pummelled, Despite Last-Minute Tax Changes

  • Tax and benefit changes will lop 1.3% off disposable incomes in 2022-23, despite Mr. Sunak's new tax cuts.
  • The Chancellor could have been bolder; he has more headroom against his fiscal targets than in October.
  • Don't bank on extra pre-election tax cuts; the OBR is too upbeat on households' spending and productivity.

Samuel Tombs and Gabriella DickensU.K.

1 Mar 2022 Business Investment Should Ensure GDP Remains on a Rising Path

  • We look for year-over-year growth in business investment to pick-up this year, reaching about 10% in Q4.
  • Brexit and Covid uncertainty has faded, profit margins are healthy, and firms have excess cash.
  • Higher oil prices will boost capex in the North Sea and in energy efficiency, but higher rates will hurt some firms.

Samuel Tombs (UK Economist)U.K.

28 Feb 2022 Markets Still Overestimating the Scope for Further Rate Hikes

  • Real household disposable income is set to drop by 2.0% this year, the most since the Second World War.
  • The Chancellor likely won't come to households' res- cue; debt interest and military spending is set to jump.
  • We have nudged down our GDP forecast and now expect it to be up only 1.5% year-over-year in Q4.

Samuel Tombs (UK Economist)U.K.

10 Feb 2022 The Recovery in Construction Output will Gain a New Lease of Life this Year

  • Easing supply constraints and labour shortages should boost the recovery in construction in H1 2022.
  • Further ahead, falling real incomes and increases in mortgage rates will dampen housebuilding activity...
  • ...Even so, we expect construction output by year end to be about 1.5% above its 2019 average level.

Gabriella DickensU.K.

3 Feb 2022 Will Supply Constraints Continue to Ease, Reducing Inflation Risk?

  • Supply chain disruptions, bottlenecks and goods and labour shortages have limited the recovery...
  • ...But the last month has brought signs of progress of all fronts, despite the surge in Covid-19 infections.
  • Supply disruptions should continue to ease, but labour shortages probably will be more persistent.

Gabriella DickensU.K.

2 Feb 2022 Money Supply Data Suggest the Economy Won't Overheat This Year

  • Growth in the broad money supply reverted to its pre-Covid rate in Q4, despite very low interest rates.
  • Households dipped into their excess savings in December to maintain their spending, not increase it.
  • Mortgage refinancing will cease to boost disposable incomes in 2022; the effective rate will stabilise.

Samuel Tombs (UK Economist)U.K.

1 Feb 2022 The Trade Deficit Will Widen this Year, Increasing Sterling's Vulnerability

  • The overall trade deficit will more than double in 2022, as the value of natural gas imports surges...
  • ...And the structural deficit in travel and transportation services gradually re-emerges.
  • Financial inflows will pick up too, supporting sterling, but another risk-off episode would hurt the pound.

Samuel Tombs (UK Economist)U.K.

26 Jan 2022 Surging Interest Costs Won't Stop Sunak Easing the Real Wage Squeeze

  • Public borrowing in 2021/22 looks set to come in at about £170B, £13B below the OBR's Budget forecast.
  • The hit from higher interest payments will exceed the windfall from higher-than-forecast GDP in 2022/23...
  • ...But Mr. Sunak built some wriggle room into his plans; he can intervene on energy prices and meet his targets.

Samuel Tombs and Gabriella DickensU.K.

17 Jan 2022 The Recovery is Over; Now Comes the Hard Part

  • GDP surpassed its pre-Covid level in November, albeit with support from some unsustainable sources.
  • Omicron has temporarily set the economy back, but GDP should return to November's level by March.
  • Thereafter, however, GDP growth likely will be slow, due to the squeeze on households' disposable incomes.

Samuel Tombs (UK Economist)U.K.

5 Jan 2022 Lower Saving Reflects Inflation Pressure, not Reviving Confidence

  • The return of monthly saving to pre-Covid levels is a sign of the real income squeeze, not surging spending.
  • The recent surge in house prices, however, is enabling refinancing homeowners to access lower interest rates.
  • Firms continued to repay external borrowing in November, but we remain upbeat on the capex outlook.

Samuel Tombs and Gabriella DickensU.K.

23 Dec 2021 The U.K. Economy Still is Among the Hardest-Hit in the G7

  • Quarter-on-quarter GDP growth was revised to 1.1% in Q3, from 1.3%, due to GFCF and public spending.
  • The shortfall in U.K. GDP from its pre-Covid Q4 2019 peak still is among the biggest in the G7.
  • Omicron, on top of falling households' real incomes and Brexit, will limit GDP growth in 2022.

Gabriella DickensU.K.

2 Dec 2021 Could the Economy Cope Next Year with the Rate Hike Markets Expect?

  • Markets expect the MPC to hike Bank Rate by nearly 100bp next year, the most in one year since 2007.
  • Rising mortgage rates likely would subtract just 0.1pp from households' disposable incomes next year...
  • ...But house prices would flatline, so 100bp is on the limit of feasibility; Omicron brings downside risks.

Samuel Tombs (UK Economist)U.K.

30 Nov 2021 Does October's Low Saving Signal Households' Mindset has Changed?

  • Households last month saved the least and borrowed the most for consumption since the pandemic began...
  • ...People are maintaining their spending while real incomes are falling; they aren't bingeing.
  • Firms continued to repay external finance in October, but this isn't necessarily a bad sign for investment.

Samuel Tombs (UK Economist)U.K.

25 Nov 2021 Business Investment Held Back by Supply Side Constraints

  • Capex failed to pick up at all in Q3, as firms struggled to get their hands on transport equipment.
  • Firms, however, appear keen to invest and have the financial resources, so a rebound remains likely.
  • We expect capex to rise by about 10% in 2022 and 4% in 2023, eventually returning to 2019's level.

Samuel Tombs (UK Economist)U.K.

24 Nov 2021 Is Mr. Sunak's Fund for Future Tax Cuts Already Under Threat?

  • Rising interest payments are slowing the rate that public borrowing is falling.
  • Fiscal headroom probably will be just half that assumed in the October Budget…
  • …But Mr. Sunak still will have a free hand in signing off pre-election tax cuts in 2023.

Samuel Tombs (UK Economist)U.K.

12 Nov 2021 Weak GDP Growth in Q3 Leaves the U.K. as the G7's Straggler Again

  • U.K. GDP was 2.1% below its Q4 2019 level in Q3, exceeding the shortfalls seen in other G7 counties.
  • Households have continued to spend more cautiously than those abroad; high virus levels are partly to blame.
  • Brexit also has contributed to the continued underper- formance; exports were 17% below their 2019 average.

Samuel Tombs (UK Economist)U.K.

4 Nov 2021 Look to the Housing Market, not Interest Payments, for Rate Hike Pain

  • The effective mortgage rate will be just 20bp or so higher at the end of 2022, if markets' Bank Rate view is right.
  • The interest rate on bank deposits would rise by more, so households' net interest payments would fall, initially.
  • The housing market, however, looks like the weak link; we expect house prices to flatline in H1 2022.

Samuel Tombs (UK Economist)U.K.

2 Nov 2021 Households won't Abandon their Cautious Mindset Anytime Soon

  • Households continued in September to save more and borrow less than they did before Covid.
  • The recovery in spending will continue only if households save less in response to falling real incomes...
  • Households did this in 2016, but are less confident now, despite having a larger precautionary buffer.

Samuel Tombs (UK Economist)U.K.

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