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

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.

3 Dec 2021 If Omicron Were Vaccine-Resistant, What Would the MPC do Next?

  • The MPC would ease monetary policy again in the unlikely event that another lockdown is imposed.
  • Fiscal policy would be less supportive than in previous lockdowns; new curbs would dampen inflation.
  • Negative rates are in the toolkit and are preferred to more QE; Bank Rate likely would be cut to -0.25%.

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.

18 Nov 2021 October's CPI Data Tip the Scales Towards a December Rate Hike

  • October's 4.2% rate of CPI inflation was well above the MPC's 3.9% forecast; such a large error margin is rare.
  • The upside surprise came from the core, and will carry over to future months; April's peak looks set to top 5%.
  • Mean-reversion in energy and goods prices, however, should ensure that CPI inflation dips below 2% in 2023.

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.

3 Nov 2021 Is the Outlook for Households' Incomes Brighter After the Budget?

  • Budget announcements, including the jump in National Living Wage, will support earnings growth next year...
  • ...but higher taxes and inflation suggest real take home pay will fall by 1.5%, the most since 2011.
  • This is one key reason we expect the MPC will hike Bank Rate by less than markets currently expect.

Samuel Tombs (UK Economist)U.K.

1 Nov 2021 Forecast Review: Rate Hikes Loom Closer, But Not This Week

  • The near-term outlook for GDP has worsened, but 2022 looks a little brighter in the wake of the Budget.
  • Higher energy prices mean we have revised up our forecast for CPI inflation in 2022 to 3.6%, from 3.4%.
  • We now expect two rate hikes, not one, in the next 12 months, but still anticipate no change this week.

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.

28 Oct 2021 A Budget with an Eye on the Next Election, not Near-Term Popularity

  • The Chancellor spent only about half of the windfall stemming from the OBR's rosier economic forecasts...
  • ...In order to build scope to cut taxes before the next election, while still meeting his new fiscal targets.
  • The OBR's new GDP forecasts are too upbeat, while its debt interest forecast is too low, but this won't matter.

Samuel Tombs and Gabriella DickensU.K.

22 Oct 2021 House Prices will Flatline in H1 2022, if Markets are Right about Rates

  • This month's Stamp Duty change has left housing unscathed; we look for a 0.5% q/q rise in house prices in Q4.
  • House prices, however, will flatline in H1 2022; two-year fixed rate mortgage rates will jump by 60bp in Q4...
  • ...The squeeze on households' real income, as inflation rises and taxes increase, also will subdue the market.

Samuel Tombs (UK Economist)U.K.

20 Oct 2021 Backdrop of Rising Borrowing Costs Will Force Mr. Sunak to be Cautious

  • The OBR likely will revise smaller its "scarring" estimate only to 2.5% of GDP, from 3.0% previously.
  • The resulting uplift to future tax revenues will be offset by higher projections for interest payments.
  • Mr. Sunak will have little, if any, headroom in meeting his target for a balanced current budget in three years' time.

Samuel Tombs (UK Economist)U.K.

27 Sept 2021 Survey Data Continue to Point to Sluggish GDP Growth in Q3

  • The fall in the composite PMI in September chimes with other data suggesting growth was sluggish in Q3.
  • Survey data also suggest the number of furloughed workers has fallen only marginally in recent weeks.
  • GDP growth will disappoint the BoE's expectations in Q3 and Q4, making a rate hike in Q1 2022 unlikely.

Samuel Tombs (UK Economist)U.K.

21 Sept 2021 Households will be Hurt by Q4's 1.5% Drop in Disposable Income

  • August's drop in retail sales was broad-based; the recovery in overall spending now is sluggish.
  • Real disposable income will drop by 1.5% q/q in Q4, as employment falls, inflation soars, and benefits are cut.
  • RHDI will recover in Q1, but then flatline in Q2, in response to the rise in employees' NICs rates.

Samuel Tombs (UK Economist)U.K.

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