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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forecasts

9 June 2022 Only Modest Permanent Tax Cuts are Possible Within the Fiscal Rules

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.

Samuel Tombs (UK Economist)U.K.

30 May 2022 How will the MPC Respond to the Chancellor's Support Measures?

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.

Samuel Tombs (UK Economist)U.K.

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.

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.

23 Feb 2022 The OBR's New Borrowing Forecasts will Make the Chancellor Grimace

  • Rising debt interest payments explain why January's surplus was smaller than the OBR forecast.
  • We expect the OBR to revise up its forecast for public borrowing in 2022/23 to about £97B, from £83B.
  • Mr. Sunak still will meet his fiscal rules, but will preserve his remaining headroom until nearer the next election.

Samuel Tombs (UK Economist)U.K.

9 Feb 2022 Will Households Spend More this Year, Despite Falling Real Incomes?

  • Real household disposable income looks set to drop by nearly 2% this year, the most since 1977...
  • ...But consumers can draw on the savings they amassed during the pandemic and borrow more.
  • We expect the saving ratio to fall to 4.5% in 2022—1.5pp below its pre-Covid level—so that spending rises further.

Samuel Tombs (UK Economist)U.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.

28 Jan 2022 Will the MPC Endorse the Upward Shift in the Market Rate Curve?

  • The MPC likely will hike Bank Rate next week, but the 95% probability priced-in by markets looks too high.
  • The MPC warned in November that spare capacity would emerge if rates rose as far as markets expected…
  • ...The curve is up 30bp since, with no cause for greater medium-term optimism; beware another dovish nudge.

Samuel Tombs (UK Economist)U.K.

12 Jan 2022 The Omicron Peak has Passed, Teeing up GDP to Rebound in February

  • Omicron cases have peaked and hospital admissions will too soon, at only half their January 2021 peak.
  • We now expect Plan B rules to expire on January 26, rather than be extended for another month...
  • ...So we are revising up our forecast for quarter-on-quarter GDP growth in Q1 to 0.2%, from zero.

Samuel Tombs (UK Economist)U.K.

4 Jan 2022 Forecast Review: Q1 GDP to be no Higher than in Q4, due to Omicron

  • Consumer caution in response to Omicron points to a near-1% fall in GDP between November and January.
  • Surging energy prices have forced us to revise up our forecast for this year's peak rate of CPI inflation to 6.0%.
  • The MPC, however, likely will wait until March to hike rates again, given the large hit to activity from Omicron

Samuel Tombs (UK Economist)U.K.

24 Dec 2021 House Prices will Stagnate in H1 2022, but are Unlikely to Fall Outright

  • House price growth dipped in October following the return of Stamp Duty Land Tax threshold to £125K...
  • ...But that most likely is a blip; timelier indicators of house price growth have remained strong in Q4.
  • We expect house price growth to stagnate in H1 2022, as mortgage rates rise and real incomes fall.

Gabriella DickensU.K.

17 Dec 2021 The MPC will Give the Economy Breathing Space Before Hiking Again

Markets now expect the MPC to hike Bank Rate to 0.50% in February, following today's surprise hike.

Most members, however, thought the decision was "finely balanced" and see a "modest" tightening ahead.

Omicron won't just have short-term effects if the MPC hikes again and pushes firms over the edge.

Samuel Tombs and Gabriella DickensU.K.

16 Dec 2021 Subdued Services Inflation Gives the MPC Time to Wait for Omicron

November's 5.1% CPI inflation rate was 0.6pp above the forecast made by the MPC only last month...

...But high inflation is due to surging energy and goods prices; underlying services inflation remains subdued.

We expect the headline rate to peak at 6.0% in April, but then to fall sharply, slipping below-target in 2023.

Samuel Tombs and Gabriella DickensU.K.

15 Dec 2021 Labour Market to Warrant Gradual Rate Hikes, Once Omicron Wanes

The unemployment rate continued to fall in October, despite the end of the furlough scheme.
Some full-time workers have become part-timers post-furlough, but they don't seem to want more hours.
Wage growth, however, slowed to a below-inflation rate in October; the real wage squeeze will get worse.

Samuel Tombs and Gabriella DickensU.K.

14 Dec 2021 Sterling to Continue to Slide in 2022, Hurt by the U.K.'s Covid Sensitivity

Trade-weighted sterling has fallen by about 2% since late October; bets on a further drop have intensified.
The U.K. economy is more Covid sensitive than most; the downside risk to rate expectations is greater.
Investors next year increasingly will price-in the risks of a messy outcome to the next general election.

Samuel Tombs and Gabriella DickensU.K.

10 Dec 2021 Omicron Damage Likely to Delay the First MPC Rate Hike Until March

  • The MPC likely will hold back from raising Bank Rate next week, despite several upside data surprises.
  • We are cutting our forecast for quarter-on-quarter GDP growth in Q1 to 0.3%, from 0.8%, due to Omicron.
  • The Covid situation won't be better in early February; the March meeting is a better bet for the first rate hike.

Samuel Tombs (UK Economist)U.K.

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