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

Please use the filters on the right to search for a specific date or topic.

interest payments

UK Datanote: U.K. National Accounts & Balance of Payments, Q3

  • In one line: The U.K. will continue to underperform the rest of the G7. 

Gabriella DickensU.K.

14 Nov 2022 UK Monitor Britain will Be the First into Recession, and the Last One Out

  • The U.K. is the only G7 country in which GDP fell in Q3
    and has never recovered to its pre-Covid peak.
  • Households’ real spending will keep falling until the end of 2023, as fiscal and monetary headwinds intensify.
  • Higher interest rates will weigh on business investment and trigger a sharp downturn in residential investment.

Samuel Tombs (UK Economist)U.K.

25 Oct 2022 UK Monitor PMI Data Show a Deepening Downturn, but Price Rises Remain too Rapid

  • October’s PMI data point to a worsening recession; a 0.5% quarter-on-quarter drop in Q4 GDP looks likely.
  • Price rises are slowing, but remain too brisk for the MPC to take breath; we look for a 75bp hike next week.
  • Further falls in interest rate expectations will weigh on sterling now the fiscal credibility gap has largely gone.

Samuel Tombs (UK Economist)U.K.

5 Oct 2022 UK Monitor The Outlook for Corporate Debt Costs is at least as Bad as for Mortgages

  • Over three-quarters of firms’ bank loans are floating rate; interest payments will absorb 20% of profits soon.
  • In total, firms’ financial assets are worth more than bank & bond debt, but they are mismatched between firms.
  • The change in firms’ borrowing costs has been a good leading indicator of employment and capex in the past.

Samuel Tombs (UK Economist)U.K.

UK Datanote: U.K. National Accounts & Balance of Payments, Q2

  • In one line: Revisions reveal even more long-term damage from Covid than previously thought. 

Samuel Tombs (UK Economist)U.K.

27 Sept 2022 UK Monitor Will the MPC Pick Prolonged High Inflation or a Mortgage Crisis

  • A recession now is all but inevitable; the key questionis how the pain will be distributed.
  • Hiking Bank Rate to 6% would crush domestically-generated inflation; mortgage defaults would soar.
  • Hiking more slowly would depress sterling and boost imported inflation, but is the lesser evil for the MPC.

Samuel Tombs (UK Economist)U.K.

26 Sept 2022 UK Monitor Mini-Budget Measures Won't Revitalise the Economy Next Year

  • Tax cuts which disproportionately benefit the top 1% of earners will do little to boost demand.
  • Most households are worse off, because the associated depreciation of sterling will raise the price level by 1.5%.
  • Mr. Kwarteng likely will impose tough spending limits in the Budget, to try to reverse the jump in gilt yields. 

Samuel Tombs (UK Economist)U.K.

21 Sept 2022 UK Monitor Mortgage Refinancing Set to Deliver a 1pp hit to Disposable Incomes in 2023

  • The effective interest rate for all mortgages has risen only slowly to date, but now looks set to soar...
  • ...As a rising number of borrowers refinance, and as lenders respond to the further jump in risk-free rates.
  • Expect a 1pp disposable income hit in 2023 if Bank Rate tops 4%, or a 0.7pp drag if Bank Rate tracks our forecast.

Samuel Tombs (UK Economist)U.K.

2 Sept 2022 UK Monitor The Inventory of Unsold Properties will Rise Over the Next Year

  • Low unemployment means few homeowners will be forced to sell up, and construction already is declining.
  • Landlords, however, likely will struggle to raise rents in line with the jump in their mortgage payments.
  • We expect the stock of homes on the market, therefore, to rise over the next year, weighing on house prices.

Gabriella DickensU.K.

1 Sept 2022 UK Monitor Capex will Continue to Recover, Despite the Risk of Recession

  • Business investment rose again in Q2, as key uncertainties faded and supply constraints began to ease.
  • We expect a further rebound in H2; balance sheets are strong and investment intentions still are high.
  • But we doubt capex will return to its pre-Brexit share of GDP; the U.K is a less desirable place to invest.

Gabriella DickensU.K.

31 Aug 2022 UK Monitor Government Support Needed to Maintain Real Consumption

  • Households continued to save less and borrow more in July, in order to maintain consumption.
  • Looking ahead, though, people lack the fire-power to withstand future income shocks.
  • We now think a winter recession will be avoided only if the government beefs up financial support massively.

Gabriella DickensU.K.

26 Aug 2022 UK Monitor It's Not all Bad News on the Inflation Front

We expect Ofgem to announce today that the default tariff cap will increase by 80% in October.

This will boost CPI inflation by 4pp, assuming the ONS treats the government's grant as a fiscal transfer.

Core goods inflation, however, is set to fall sharply this winter; manufacturers and retailers have excess stock.

Samuel Tombs (UK Economist)U.K.

25 Aug 2022 UK Monitor Will Sterling Force the MPC into a Painful Rate Hiking Path?

Sterling has dropped, despite a sharp rise in Bank Rate expectations, because expected inflation has soared.

But the MPC will have flexibility if, as we expect, core inflation falls, boosting the expected real rate.

We expect the U.S. Fed to be more cautious than investors expect, easing some of the pressure on the MPC.

Samuel Tombs (UK Economist)U.K.

23 Aug 2022 UK Monitor Public Borrowing of £170B this Year Likely Needed to Avert a Recession

Interest payments look set to be about £37B higher in 2022/23 than the OBR forecast in March.

So the next PM will have to borrow more this year than last to have a fighting chance of averting a recession.

We expect Ms. Truss to unveil tax cuts and extra grants worth an extra £20B this year, and £44B in 2023/24.

Samuel Tombs (UK Economist)U.K.

19 Aug 2022 UK Monitor The U.K.'s High Inflation is Due to Fiscal Policy, Not an Overheating Economy

The U.K.'s relatively high rate of CPI inflation is largely due to government policies.

The energy price shock has been softened by grants, not tax cuts; VAT and NICs hikes have also played a role.

Higher core goods inflation than in the Eurozone is largely due to Brexit, not stronger underlying demand.

Samuel Tombs (UK Economist)U.K.

10 Aug 2022 UK Monitor Rate Cuts Next Year? Don't Price Them In Until Q4 2023 at the Earliest

Dave Ramsden is the first MPC member to admit rates might need to be cut "quite quickly" in the medium term.

The cuts currently priced-in by markets from late H2 2023 aren't big enough to lower households' interest bill.

But CPI inflation won't be near the target until Q4 2023; pre-election fiscal stimulus will limit the scope for easing.

Samuel Tombs (UK Economist)U.K.

5 Aug 2022 UK Monitor The MPC's New Forecasts Challenge Markets' View of Much Higher Rates

The MPC's forecasts signal clearly that markets' medium-term expectations for Bank Rate are too high.

But concerns about persistence in domestic price setting, and looser fiscal policy, will spur further hikes.

We now expect the MPC to raise Bank Rate to 2.00% in September and 2.25% in November, and then to pause.

Samuel Tombs (UK Economist)U.K.

4 Aug 2022 UK Monitor The Headwind from Mortgage Refinancing is Set to Intensify

The effective interest rate on the stock of mortgages rose by only 11bp in H1, but will jump by 30bp in H2...

...and by a further 30bp over the course of 2023, if markets are right about the path for risk-free rates.

Firms still are very exposed to movements in short- rates; the transmission mechanism remains powerful.

Samuel Tombs (UK Economist)U.K.

1 Aug 2022 UK Monitor Will a Household Saving Drawdown Keep a Winter Recession at Bay?

Households saved much less and borrowed more in Q2; real spending, therefore, likely was unchanged from Q1.

On paper, households have ample scope to reduce their saving rate further, but we see several constraints.

Some already have depleted savings, credit conditions are tightening, and deleveraging will be more attractive.

Samuel Tombs (UK Economist)U.K.

27 July 2022 UK Monitor Active Gilt Sales Likely will be at the Low End of Bailey's Proposed Range

The BoE is considering active gilt sales that would result in a reduction in the APF of £50B-to-£100B in year one.

This implies active sales of £15B-to-£65B if they begin in Q4; we expect sales at the lower end of that range.

The CBI’s Distributive Trades Survey shows retailers’ stock levels are far too high; discounting will intensify.

Samuel Tombs (UK Economist)U.K.

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