2 Dec 2022 UK Monitor Price and Wage Data are Aligning for a Smaller MPC Rate Hike this Month

The slowdown in the pace of core price rises in the Eurozone in November is a good omen for the U.K.

Inflation expectations among households and businesses are falling, now that a recession is taking hold.

Manufacturers’ and retailers’ excess inventory reinforces the case for expecting goods inflation to drop.

Samuel Tombs (UK Economist)U.K.

21 Nov 2022 UK Monitor Is the Outlook for Households Really as Bad as the OBR Thinks?

• The OBR's forecast for the effective mortgage rate looks
  implausibly high; we expect a smaller drop in RHDI...
• ...But its forecast for the saving rate to fall to a joint-record low, supporting spending, jars with past experience.
• The saving rate usually rises when the unemployment rate increases; rising rates will spur debt repayments.

Samuel Tombs (UK Economist)U.K.

7 Nov 2022 UK Monitor Forecast Review, Same Dismal Outlook, but a Different Mix of Drivers

• The U-turn in the direction of fiscal policy has offset the better news on the outlook for borrowing costs.
• Plausible assumptions suggest Autumn Statement measures will inflict a 0.3% blow to GDP in 2023/24.
• A halving of energy price support for households in April would raise the path for CPI inflation by about 2.0pp.

Samuel Tombs (UK Economist)U.K.

1 Nov 2022 UK Monitor Households are Holding onto their Savings; Real Spending will Fall.

• Households saved more and borrowed less than usual in September, as the economic outlook deteriorated.
• Households will remain cautious as confidence continues to be hit by fears over mortgage payments.
• Real consumption looks set to drop by 1.5% next year, reflecting a fall in real incomes.

Gabriella DickensU.K.

28 Oct 2022 UK Monitor How will the Government Phase Out the Costly Energy Price Guarantee

• Wholesale prices imply it would cost £65B to maintain the Energy Price Guarantee from Q2 until Q3 2024.
• Simply removing it, however, would inflict a near-3% income blow on households in April; that's not realistic.
• Scrapping standing charges would limit prices, cap the Treasury's exposure, and encourage energy efficiency.

Samuel Tombs (UK Economist)U.K.