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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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Sterling has dropped, despite a sharp rise in Bank Rate expectations, because expected inflation has soared.
But the MPC will have flexibility if, as we expect, core inflation falls, boosting the expected real rate.
We expect the U.S. Fed to be more cautious than investors expect, easing some of the pressure on the MPC.
August’s PMIs suggest the recovery has petered out, with the manufacturing sector heading into recession.
Employment growth also has come off the boil, while price pressures mostly have continued to ease.
All this suggests the MPC have room to act with caution; a 50bp hike is not the done deal assumed by markets.
Interest payments look set to be about £37B higher in 2022/23 than the OBR forecast in March.
So the next PM will have to borrow more this year than last to have a fighting chance of averting a recession.
We expect Ms. Truss to unveil tax cuts and extra grants worth an extra £20B this year, and £44B in 2023/24.
House purchase demand is falling quickly in response to the jump in mortgage rates and drop in real incomes.
New mortgage rates look set to rise further in Q3, greatly weighing on approvals.
A contraction in supply, however, will prevent a slump in prices; we still forecast a modest 2% decline in H2 2022.
We have revised up our forecast for Q4 CPI inflation by 1.0pp since early July; energy prices have surged again.
But we have revised down our forecast for the level of GDP by only 0.5pp in Q4; fiscal policy will respond.
People also have shown more willingness to deplete savings; we still expect a recession to be narrowly avoided.
PMI data for July show that the recovery in GDP has nearly ground to a halt and inventory is piling up.
Employment growth slowed to a 15-month low, while the pace of input and output price rises eased materially.
On balance, the latest data imply the MPC won't act "forcefully"; market pricing for August is still too high.
Accrued debt interest looks set to top the OBR’s forecast by £21B this year, and £15B in the medium term...
...This leaves insufficient headroom for Ms. Truss to de- liver her tax cuts and still run a balanced current budget.
Labour supply has not been hit by April’s increase in NI contributions; reversing it won't be self-funding.
The Governor emphasised at Mansion House that the drop in the workforce has been a key driver of rate rises.
So its 0.8% 3m/3m rise in May, the largest since 1984, should ensure the MPC sticks to a 25bp hike in August.
The workforce has scope to rebound further, while vacancy and survey data imply job growth will slow.
May’s rise in GDP was driven by a surge in doctor appointments-
really-and a jump in manufacturing output.
Consumer services firms struggled and will remain under pressure as households’ real incomes fell further.
June’s extra bank holiday also will dampen Q2 GDP, we expect a quarter-on-quarter contraction of 0.3%.
Year-over-year growth in private-sector wages slowed to 4.7% in April, slightly below the MPC’s 4.8% forecast.
The job market no longer is tightening, as the workforce recovers and growth in employment starts to slow.
We still expect the workforce to recover further, anchoring wage growth and easing the pressure for rate hikes.
April's fall in GDP was driven by Covid spending, but flat private sector GDP caused the downside surprise.
Consumer services firms likely increasingly struggled during Q2, as households' real incomes fell further.
June's extra bank holiday also will dampen Q2 GDP; the MPC has to lower its forecast for 0.1% q/q growth.
The MPC was clear last month; no more than two 25bp rate hikes would be needed to tame inflation.
Since then, activity indicators have weakened and medium-term inflation expectations have stayed low.
A majority will vote again to hike by 25bp, and investors will be left revising the odds of 50bp in August.
The OBR’s March forecasts suggest tax cuts equal to 1.0% of GDP are permissible under the fiscal rules.
But since then, the Treasury’s borrowing costs have risen, reducing scope for tax cuts to 0.7% of GDP.
The Tories will be reluctant to ditch the rules, as this would inhibit their ability to criticise Labour’s plans.
Households still were unwilling to use their excess savings in April, despite the sharp drop in real incomes.
With excess savings equal to £186B and consumer credit £23B below its peak, consumers still can spend.
But low confidence, the unequal distribution of savings and falling incomes suggests expenditure will dip in Q2.
Mr. Sunak's measures will boost households' nominal incomes in H2 by 2% and nominal GDP by about 0.7%.
The medium-term impact, however, will be small, and the package is so timely the MPC can't feasibly offset it.
So the outlook for Bank Rate hasn't changed radically; we now expect it to rise to 1.50%, not 1.25%, this year.
Public borrowing in April was in line with the OBR’s forecast, but expect upside surprises later this year.
Mr. Sunak likely will not opt to reduce the main rate of VAT; firms would benefit more than households.
Bringing forward April 2023’s large CPI-linked increase in benefits to October would make the most sense.
People are more likely to drain savings when they are glum due to inflation than when they fear redundancy.
April's recovery in retail sales suggests that households are prepared to defend their current real spending.
Recession risks likely will be further minimised by extra support from the government in the autumn.
Year-over-year growth in the official measure of house prices fell to 9.8% in March, from 11.3% in February.
Surging mortgage rates and falling real disposable incomes will cause house price growth to slow further.
We expect house prices to level off in H2, leaving the year-over-year rate at around 5% at the end of 2022.
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