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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20 Jan 2022 The MPC will React Immediately to December's Blowout CPI Figure

  • We are bringing forward our forecast for the next two increases in Bank Rate, following December's CPI data.
  • While food, energy and goods prices are mainly to blame for high inflation, services inflation has risen too.
  • CPI inflation, however, will fall sharply in H2 and should be below target in 2023, curtailing the hiking cycle.

Samuel Tombs (UK Economist)U.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.

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.

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.

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.

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.

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.

26 Nov 2021 Could Europe's Covid Wave Enfeeble Britain's Recovery?

  • The fast rollout of boosters has reduced U.K. hospital admissions, whereas they are surging across Europe.

    Economic contagion for the U.K. in the event of fresh restrictions in the rest of Europe should be modest.

    Manufacturing output would be unaffected, while the weaker euro will help to lower U.K. CPI inflation in 2022.

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.

16 Nov 2021 Exports are Still in the Doldrums; Brexit Clearly is to Blame

  • U.K. exports in Q3 were 14% below their 2018 average, a larger shortfall than in any other G7 economy.
  • It's not just services exports; U.K. goods exports are well below their pre-Covid level; Brexit is to blame.
  • Several potential further headwinds loom, including the risk of further trade barriers from the EU.

Gabriella DickensU.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.

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.

21 Oct 2021 Plenty of Ammo for the MPC's Doves in September's CPI Report

  • The MPC's preferred measure of underlying services inflation merely matched its 2010s average in September.
  • CPI inflation is on course to rise to a peak of about 4.8% in April, from 3.1% in September...
  • ...But the rise will be driven largely by higher energy prices; core inflation should remain well-behaved.

Samuel Tombs (UK Economist)U.K.

18 Oct 2021 September's CPI Data will be the Calm Before the Storm

  • CPI inflation likely was unchanged in September from August's 3.2% rate.
  • Used car prices have surged again, while surveys point to retailers increasing prices faster than usual...
  • ...But motor fuel prices rose only slightly, and accom- modation and food services inflation likely fell back.

Samuel Tombs (UK Economist)U.K.

14 Oct 2021 Recovery Sluggish Even Prior to the Withdrawal of Fiscal Support

  • August's 0.4% m/m rise in GDP sets it up for a 1.5% q/q rise in Q3, below the 2.1% expected by the MPC.
  • Health sector output probably rebounded in September, but the "staycationing" boost likely faded.
  • We're lowering our Q4 GDP forecast to 1.0% q/q, from 1.2%; fiscal, fuel and energy headwinds are strong.

Samuel Tombs (UK Economist)U.K.

12 Oct 2021 How Much Weight will the MPC Place on Inflation Expectations?

  • Markets see a 50% chance of the MPC hiking Bank Rate next month; December viewed as a done deal.
  • November still seems too early; the MPC saw "a high option value" in waiting for post-furlough jobs data.
  • Inflation expectations exceed the rate implied by current inflation, but this residual isn't a reliable wage signal.

Samuel Tombs (UK Economist)U.K.

6 Oct 2021 Net Trade will Return to Depressing GDP Growth Next Year

  • Revisions to Q2 GDP data brightened the picture of the economy's recent trade performance...
  • ...But Brexit still is preventing U.K. exporters from benefiting fully from the upswing in global trade.
  • The return of the structural deficit in services trade will cause net trade to weigh on GDP growth in 2022.

Samuel Tombs (UK Economist)U.K.

4 Oct 2021 Forecast Review: One Rate Hike in 2022 Now Looks Likely

  • We have lowered our forecast for Q4 GDP, due to the impaired supply of fuel and industrial inputs.
  • Surging energy prices have forced us to hike our forecast for CPI inflation in 2022 to 3.4%, from 2.5%.
  • We now expect the Committee to hike Bank Rate in Q2 2022, but we don't buy investors' hawkish view.

Samuel Tombs (UK Economist)U.K.

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