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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labour force

9 Aug 2022 UK Monitor The Unemployment Rate will Rise Sooner than the MPC Expects

The MPC currently expects the unemployment rate to remain well below 4% until Q3 2023...

...But timely indicators suggest demand for labour already is cooling, just as supply is starting to recover.

We expect the unemployment rate to rise above 4% before year-end, keeping a lid on wages and rate hikes.

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.

2 Aug 2022 UK Monitor Forecast Review: Fiscal Policy and Lower Saving Likely to Avert Recession

We have revised up our forecast for Q4 CPI inflation by 1.0pp since early July; energy prices have surged again.

But we have revised down our forecast for the level of GDP by only 0.5pp in Q4; fiscal policy will respond.

People also have shown more willingness to deplete savings; we still expect a recession to be narrowly avoided.

Samuel Tombs (UK Economist)U.K.

20 July 2022 Reviving Workforce Growth Eases the Pressure for Large Rate Hikes

The Governor emphasised at Mansion House that the drop in the workforce has been a key driver of rate rises.

So its 0.8% 3m/3m rise in May, the largest since 1984, should ensure the MPC sticks to a 25bp hike in August.

The workforce has scope to rebound further, while vacancy and survey data imply job growth will slow.

Samuel Tombs (UK Economist)U.K.

UK Datanote: U.K. Labour Market Data, May/June 2022

  • In one line: The workforce is starting to bounce back, preventing the labour market from tightening further.

Samuel Tombs (UK Economist)U.K.

14 July 2022 We Still Expect a Contraction in GDP in Q2, Despite the Sharp Rise in May

May’s rise in GDP was driven by a surge in doctor appointments-

really-and a jump in manufacturing output.

Consumer services firms struggled and will remain under pressure as households’ real incomes fell further.

June’s extra bank holiday also will dampen Q2 GDP, we expect a quarter-on-quarter contraction of 0.3%.

Gabriella DickensU.K.

13 July 2022 Expect More Signs of a Loosening Labour Market Next Week

We think employment grew at a steady 0.5% threemonth-on-three-month pace in May.

But expect even faster growth in the workforce to mean that the unemployment rate edged up again.

Surveys suggest wage growth had no more momentum in May than in prior months.

Gabriella DickensU.K.

7 July 2022 Medium-term Economic Prospects could be Brighter with a New PM

The potential medium-term gains might make the nearterm stasis caused by a new Tory leader contest worth it.

A more pragmatic approach to E.U. relations would lift exports and capex; supply-side reforms are overdue.

A snap election isn't likely, given the big majority a new leader would inherit and the poor economic backdrop.

Samuel Tombs (UK Economist)U.K.

1 July 2022 Most of Q1's Increase in GDP Likely was Reversed in Q2

The first quarter’s rise in GDP has brittle foundations; households have had to retrench in Q2.

The support to GDP growth from restocking will fade; firms now have enough inventory to meet demand.

A recession, however, isn’t likely; households’ real dis- posable incomes will rise in Q3, and capex will recover.

Samuel Tombs (UK Economist)U.K.

30 June 2022 Services Inflation is High Only Due to Energy Price Rises and Tax Changes

Rising energy prices likely accounted for 1.6 percentage points of May's 4.9% rate of services CPI inflation.

While the jump in the VAT rate for the hospitality and recreation sector likely has lifted it by a further 0.6pp.

Underlying services inflation, therefore, only just exceeds its 2.5% average rate in the second half of the 2010s.

Samuel Tombs (UK Economist)U.K.

28 June 2022 House Prices Now Likely to Fall in H2, Due to the Surge in Mortgage Rates

Mortgage rates have surged in recent months, but still have a lot further to rise over the summer.

Monthly mortgage payments for the average borrower will be £300 higher in July than at the end of 2021.

Prices will be supported by the solid labour market and savings, but the hit from higher rates will dominate.

Samuel Tombs (UK Economist)U.K.

23 June 2022 Core CPI inflation Already has Peaked and will Fall Rapidly in Early 2023

Core CPI inflation declined to 5.9% in May, from 6.2% in April, and will fall further in June.

Retailers are shrinking their margins, rather than passing on surging producer prices fully to consumers.

Faltering demand will constrain future core price rises, enabling the MPC to stop its hiking cycle this year.

Samuel Tombs (UK Economist)U.K.

15 June 2022 Stable Wage Growth and a Reviving Workforce will Cheer the MPC

Year-over-year growth in private-sector wages slowed to 4.7% in April, slightly below the MPC’s 4.8% forecast.

The job market no longer is tightening, as the workforce recovers and growth in employment starts to slow.

We still expect the workforce to recover further, anchoring wage growth and easing the pressure for rate hikes.

Samuel Tombs (UK Economist)U.K.

8 June 2022 Signs of a Slowdown will Restrain the MPC to a 25bp Hike Next Week

The fall in May’s composite PMI to a 15-month low is a clear sign that growth is faltering as real incomes drop.

Retail and car sales also have been weak; we expect a quarter-over-quarter drop in GDP in Q2 of about 0.5%.

May’s PMI makes it more likely the MPC will hike by just 25bp this month; markets' expectations are too high.

Gabriella DickensU.K.

7 June 2022 How would the Economic Outlook Change if Mr. Johnson is Dethroned?

The PM still won't be safe if he wins the confidence vote; rule changes or a recall petition could remove him.

A change of leader would raise the chances of a general election, which might weigh on business investment.

But the economic outlook will improve if a successor is constructive with the E.U. and on supply-side reforms.

Samuel Tombs (UK Economist)U.K.

31 May 2022 A Rebound in the Workforce will Help to Contain Wage Growth

The labour market currently is very tight, largely due to a sharp decline in the size of the workforce.

We think, however, that around half of that decline will reverse by end-2023, keeping a lid on wage pressures.

This is one reason why we think the MPC will hike Bank Rate by less than markets expect.

Gabriella DickensU.K.

27 May 2022 The Chancellor's Extra Measures Meaningfully Reduce Recession Risk

The £15B support package is hefty, timely and targeted; it offsets most of October’s £24B energy bill rise.

The extra cash likely will lift GDP by 0.7% in the second half of this year; this matters for monetary policy.

Strikes will become more common over the coming months, but won’t tip the balance towards recession.

Samuel Tombs (UK Economist)U.K.

25 May 2022 The Sharp Decline in the PMI Makes a Pause from the MPC Even More Likely

The PMI points to GDP flatlining in Q2, but a fall is more likely, given the plunge in government Covid spending.

The MPC shouldn't take comfort from the resilience of the employment index; it lags changes in the PMI.

Many firms still are hiking prices, but the number absorbing cost rises, due to faltering demand, is growing.

Samuel Tombs (UK Economist)U.K.

24 May 2022 Considering Energy, VAT and Sterling Scenarios for CPI Inflation

CPI inflation likely would hit the 2% target by April 2023, if energy prices instantly return to early January levels.

Past experience suggests a temporary 2.5pp VAT cut would lower CPI inflation by only 0.3-to-0.6pp.

A 10% depreciation of sterling would boost the CPI by 0.75pp after one year, and by 2.75pp in the long term.

Samuel Tombs (UK Economist)U.K.

18 May 2022 The Latest Wage Growth Figures Won't Make the MPC Panic

  • Average wages in Q1 were boosted by bonuses; ex-bonus growth has merely matched the MPC’s forecast. 
  • The sharp rise in average hours has boosted weekly wages too; underlying pay pressures are manageable.
  • We expect the labour market to stop tightening soon, as both the participation rate and immigration rise.

Samuel Tombs (UK Economist)U.K.

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