- Surging Covid-19 cases largely were responsible for the near-stagnation of GDP in July.
- The virus no longer is driving labour shortages, but many remain fearful and will spend less if it picks up.
- We still look for quarter-on-quarter growth in 1.5% in Q3, half the rate expected by the MPC.
- GDP likely held steady in July, falling short of the consensus and the level implied by the BoE's Q3 forecast.
- Surging Covid cases depressed output in the distribution, food services and education sectors.
- A decline in new Covid-19 vaccinations probably led to a reduction in output in the health sector too.
- The U.K. economy was hit harder by the pandemic and has struggled to catch up to the Eurozone since.
- Britain's faster rollout of vaccines led many to assume that it would close the gap with the Eurozone in Q3...
- ...But near-real-time indicators imply Q3 GDP growth actually was stronger in the Eurozone than the U.K.
- In one line: Slowing growth in output attributable to both supply constraints and demand.
- Businesses are reporting low inventory in relation to demand, but shops remain well-stocked for now.
- Labour shortages should fade now that self-isolation rules have eased and the holiday season is nearly over.
- The workforce, however, is 2.2% below its pre-Covid trend; migration and participation won't fully recover.
- August's sharp fall in the composite PMI brings it in line with other indicators, which weakened in July.
- In fact, GDP likely rose at a faster rate in August than July, though it won't match its peak until year-end.
- Output prices reportedly rose at a slower pace in August, tentatively supporting the "transitory" take.
- Employee numbers have rebounded since the spring, but total employment is lagging behind.
- Vacancies are high, but are concentrated in different sectors to those which will see post-furlough layoffs.
- High inflation and 4-to-5% unemployment didn't lift wage growth in 2017, and probably won't this time.
The U.K. economy was the G7's straggler for a fifth consecutive quarter, despite the rebound in Q2.
GDP will barely rise in July; June's surges in output in the health and advertising sector will reverse...
...while data from OpenTable and the BRC point to a step down in consumers' spending last month.
The MPC's forecasts imply markets' expectations for future rate hikes are about right...
...But the risks to the MPC's economic forecasts now are skewed firmly to the downside.
We now expect the first rate hike in Q2 2023, slightly earlier than before, with QE wind-down coming later.
In one line: Broadly endorsing markets’ current expected rate path.
In one line: Raw material and staff shortages curb the recovery’s momentum.
In one line: Recovery losing momentum in the face of supply shortages.
Now that negative rates are in the toolkit, the MPC might divulge its new estimate for the lower bound.
The MPC also might lower the threshold that Bank Rate must reach before it starts to wind down QE.
We expect Ofgem to announce on Friday that the default tariff cap will rise by a painful 13.5% in Q4.
The proportion of staff furloughed fell to 5.7% at the end of June, from 7.5% a month earlier...
...But surveys point to only a marginal fall in early July, and still high usage in fully recovered sectors.
Firms likely won't fully relinquish recent productivity gains; the employment rate will drop back in Q4.
The recovery in the manufacturing sector slowed in July, probably to a complete standstill.
Output should pick up in the autumn, amid easing supply constraints and robust restocking demand...
...But we see little chance of long-term reshoring; Brexit is another barrier to a sustained recovery.
In one line: Slowed temporarily by rising Covid-19 cases.
The ONS' Business Impact of Covid-19 survey suggests business turnover has flatlined since late May.
The disruption caused by the "pingdemic" wors- ened in late July, but likely is now starting to fade.
Unemployment still looks set to jump in Q4, despite another hefty drop in furlough scheme usage in June
Q2 CPI inflation exceeded the MPC's one-quarter ahead forecast by the most for 13 years...
...But only two members have implied they will vote to end QE; pushback from the doves has been strong.
Inflation expectations have remained well-anchored;Team Transitory probably is right.
On the face of it, May's trade data suggest Brexit's adverse impact has faded considerably...
...But the U.K. is not benefiting from the global upswing in trade to the same extent as its peers.
Brexit is one reason why we expect the recovery in GDP to slow as it approaches its pre-Covid level.
The larger-than-consensus fall in the composite PMI adds to evidence that the recovery is slowing.
The disruption caused by Covid-19 cases is only part of the story; a weaker underlying picture is emerging.
Prices still are rising sharply, but there are some early signs that the upward pressure is easing.