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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ONS

27 Apr 2022 Public Borrowing Likely to Exceed the OBR's Forecast This Year

The estimate of public borrowing in 2021/22 almost certainly will be revised down over the coming months.

But we think public borrowing is on course to overshoot the OBR's forecast in 2022/23 and beyond.

The OBR's assumption that productivity will grow at double the pace seen in the 2010s is implausible.

Samuel Tombs (UK Economist)U.K.

21 Apr 2022 Stockbuilding will Swing to Depressing GDP Growth Shortly

Firms want to hold more stocks than in the 2010s, but now are accumulating them at a slower pace.

GDP growth depends on the rate of change in inventories, so the deceleration will depress growth.

Futures prices historically have been a better guide to energy prices than assuming they don't change.

Samuel Tombs (UK Economist)U.K.

20 Apr 2022 The RPI-CPI Wedge will Return to its Pre-Covid Norm Next Year

RPI inflation will rise even more than CPI inflation in April, due to the bigger weighting of energy prices.

But house price growth is about to slow, while mortgage interest payments will rise only slowly.

Weighting differences point to a bigger drag on RPI inflation from falling energy prices next year.

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.

23 Mar 2022 Rising Interest Payments Explain Mr. Sunak's Expectations Management

  • Public borrowing in February exceeded the OBR's forecast by £5B; interest payments were partly to blame.
  • The OBR's forecast for interest payments in 2022/23 likely will rise by more than its forecast for tax receipts.
  • Mr. Sunak still can support households today, but he will prioritise retaining scope for pre-election tax cuts.

Samuel Tombs (UK Economist)U.K.

15 Mar 2022 This Year's Trade Deficit will be the Largest Since the Late 1980s

  • January's record large trade deficit was not just due to erratic items; higher energy prices are partly to blame.
  • U.K. exporters also are continuing to lose market share; no reason to expect a turnaround this year.
  • Imports will continue to rise quickly, driven by higher energy prices and the recovery in outbound tourism.

Gabriella DickensU.K.

UK 7 Mar 2022 Forecast Review: Brace for an 8% Double Peak in CPI Inflation

  • CPI inflation now is set to rise to 8% in April, and touch 8% again in October, due to the surge in energy prices. 
  • Low confidence implies households won't touch their savings much, so we have lowered our GDP forecast. 
  • Markets expect four more 25bp rate hikes this year, though we continue to expect only two. 

Samuel Tombs (UK Economist)U.K.

17 Feb 2022 Inflation Data Bolster the Case for Rate Hikes, but not 50bp in One Go

  • January's 5.5% rate of CPI inflation only just exceeded the MPC's 5.4% forecast; the surprise was all in goods.
  • Services inflation is only slightly above its long-run average; the MPC needn't panic.
  • The headline rate likely will peak at 7.7% in April, but then fall swiftly, potentially undershooting the target in 2023.

Samuel Tombs (UK Economist)U.K.

15 Feb 2022 January CPI Inflation to Maintain the Pressure on the MPC

  • We think CPI inflation rose by 0.1pp to 5.5% in January, but annual weight changes increase the uncertainty.
  • Core goods prices surely leapt; data from the Eurozone and the U.K.'s BRC point to a very large increase.
  • A base effect likely depressed accommodation services inflation, but wider services inflation is trending up.

Samuel Tombs and Gabriella DickensU.K.

7 Feb 2022 Forecast Review: Two More Rate Hikes and the MPC Will be Done

  • We have revised up our forecast for CPI inflation again, and now expect it to peak at 7.5% in April.
  • The squeeze on real incomes is set to be intense, though savings depletion should support spending.
  • We now expect the MPC to hike Bank Rate to 0.75% in March and 1.0% in May, but then to go no further.

Samuel Tombs (UK Economist)U.K.

4 Feb 2022 MPC to Markets: Don't Get Carried Away

  • Investors think the MPC will hike Bank Rate by a further 100bp this year, leaving it at 1.5% by year-end.
  • But the MPC still expects only "modest" further hikes; Bailey was clear: "do not get carried away".
  • The MPC's forecasts for CPI inflation imply rates need to rise only 35bp more to return it to the 2% target.

Samuel Tombs and 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.

14 Jan 2022 CPI inflation Likely was Stable in December, to the MPC's Relief

  • CPI inflation probably was unchanged at 5.1% in December, giving the MPC some breathing space.
  • Pick-ups in food and used car price inflation likely were offset by falls in the tobacco and clothing components.
  • The seasonal surge in plane ticket prices will boost the CPI less than usual, because its weight has shrunk.

Samuel Tombs (UK Economist)U.K.

6 Jan 2022 What Would Government Energy Price Intervention Mean for Inflation

  • The default tariff energy price cap looks set to rise by 47% in April, pushing up CPI inflation to 6.2%.
  • The rise will be larger, if suppliers are immediately compensated for acquiring failed competitors' customers.
  • Removing VAT would limit the inflation peak to 6.0%; a supplier loan scheme could have a bigger impact.

Samuel Tombs (UK Economist)U.K.

9 Dec 2021 CPI Inflation Likely Exceeded the MPC's Forecast, Again, in November

  • CPI inflation likely rose to 4.8% in November—0.3pp above the MPC's forecast—from 4.2% in October.
  • Used car prices still are rising rapidly, while supermar- kets are passing on higher food prices to shoppers.
  • Tobacco prices were lifted by a duty hike, while cloth- ing CPI inflation likely was boosted by a base effect.

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.

19 Nov 2021 Near-Real-Time Indicators Signal a Further Slowdown in Q4

  • The ONS' BIC survey suggests the recovery stalled in both October and November
  • OpenTable figures show that the boom in dining out has faded in November.
  • We expect quarter-over-quarter GDP growth to slow to 1.0% in Q4, from 1.5%, and below the consensus, 1.1%

Gabriella DickensU.K.

17 Nov 2021 Relief on Unemployment, but Still No Clarity on Wider Labour Market Slack

  • The 0.6% m/m rise in payroll employee numbers in October implies unemployment didn't rise post-furlough...
  • ...But the drop in median pay in October suggests many furloughed staff have returned only part-time.
  • Year-over-year growth in wages continued to slow in September; no sign of a wage-price spiral forming.

Samuel Tombs (UK Economist)U.K.

5 Nov 2021 Markets Jolted Back to Reality by a Cautious MPC

  • On balance, we still think the MPC won't act next month; Mr. Bailey hinted October's labour data may not suffice.
  • The MPC's inflation forecasts seemingly support markets' view that rates will rise to 1.0% by the end of 2022...
  • ...But they are based on implausible energy price figures; its spare capacity forecasts point to a lower rate path.

Samuel Tombs (UK Economist)U.K.

29 Oct 2021 Higher Government Spending to Force the MPC's Hand, but Not Yet

  • The MPC's view the output gap has closed means it must counter plans for higher government spending.
  • But the Committee can wait until 2022 to act; the recovery is faltering, and underlying inflation is not high.
  • The MPC will see key jobs data if it waits until December; higher rates are coming, but not just yet.

Samuel Tombs (UK Economist)U.K.

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