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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29 June 2022 Does Higher Inflation than in the Euro- zone Point to a U.K.-Specific Problem?

CPI inflation in May was 1pp higher in the U.K. than in theEurozone; Brexit hasn’t helped but isn’t the main cause.

U.K. core goods prices were depressed more by lock- downs; base effects will lower the U.K.’s rate soon.

The relative strength of U.K. services inflation is due to VAT hikes and a rise in course costs for E.U. students.

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.

21 June 2022 Will Sterling Force the MPC to Stick to a Path of Rapid Rate Hikes?

OIS rates do not accurately reflect investors’ expectations for Bank Rate; a sub-2% peak wouldn’t be a shock.

The outlook for sterling is more closely tied to overall risk sentiment in markets than the outlook for U.K. rates.

Our call that rates will top out at 1.75% assumes positive supply-side developments which will boost risk appetite.

Samuel Tombs (UK Economist)U.K.

20 June 2022 CPI Inflation Likely Undershot the MPC's Forecast Again in May

We think the headline rate of CPI inflation was stable at 9.0% in May, despite rising food and fuel inflation. 

Core CPI inflation likely fell; data suggest the rise in goods prices didn’t match the big jump a year ago. 

Retailers are starting to accept a squeeze on the margins, while used car prices are continuing to fall. 

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.

13 June 2022 The MPC will Hike by 25bp, but Won't Signal a 50bp Jump in August

The MPC was clear last month; no more than two 25bp rate hikes would be needed to tame inflation.

Since then, activity indicators have weakened and medium-term inflation expectations have stayed low.

A majority will vote again to hike by 25bp, and investors will be left revising the odds of 50bp in August.

Samuel Tombs (UK Economist)U.K.

30 May 2022 How will the MPC Respond to the Chancellor's Support Measures?

Mr. Sunak's measures will boost households' nominal incomes in H2 by 2% and nominal GDP by about 0.7%.

The medium-term impact, however, will be small, and the package is so timely the MPC can't feasibly offset it.

So the outlook for Bank Rate hasn't changed radically; we now expect it to rise to 1.50%, not 1.25%, this year.

Samuel Tombs (UK Economist)U.K.

20 May 2022 The Start of a More Protracted Slowdown for House Price Growth?

Year-over-year growth in the official measure of house prices fell to 9.8% in March, from 11.3% in February.

Surging mortgage rates and falling real disposable incomes will cause house price growth to slow further.

We expect house prices to level off in H2, leaving the year-over-year rate at around 5% at the end of 2022.

Gabriella DickensU.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.

17 May 2022 The Trade Deficit will Remain Large, Casting a Shadow Over Sterling

The trade deficit, excluding erratics, jumped to a recordhigh in March, largely due to the surge in energy prices.

High energy prices, surging imports of travel services and weak export growth will keep the deficit wide.

Governor Bailey is showing no signs of buckling to pressure from MPs for faster rate hikes to tame inflation.

Samuel Tombs (UK Economist)U.K.

6 May 2022 New Forecasts Imply the MPC Intends Only One-to-Two More 25bp Hikes

At least two MPC members now think Bank Rate does not need to rise any further in the near term.

The MPC’s three-year ahead forecast for inflation, based on market rates, is its lowest for over 13 years.

Markets’ rate expectations fell yesterday, but they still look too high in light of the MPC's new projections.

Samuel Tombs (UK Economist)U.K.

UK Datanote: U.K. MPC Decision, Minutes & Monetary Policy Report, May

  • In one line: Still signalling a much smaller further rise in Bank Rate than markets expect.

Samuel Tombs (UK Economist)U.K.

4 May 2022 Will Sterling Derail the MPC's Plans for "Modest" Tightening?

Sterling fell by 2% on a trade-weighted basis in April; investors are increasingly betting on a further fall.

The MPC can't be indifferent to sterling; depreciations impart a large and long-lasting boost to inflation.

But sterling's recent insensitivity to changes in rate expectations implies it can hike Bank Rate "modestly".

Samuel Tombs (UK Economist)U.K.

3 May 2022 Forecast Review, The Near-Term Outlook for GDP Has Worsened

The near-term outlook for households' real disposable income looks bleak; we still expect GDP to drop in Q2.

A recession, however, isn't our base case; people have ample scope to draw on savings and to borrow more.

We now Bank Rate to top out at 1.25% this year, not 1.00%, but still think markets have lost the plot.

Samuel Tombs (UK Economist)U.K.

29 Apr 2022 The MPC will Wait Until August to Publish its Plans for Gilt Sales

Active QT likely will have a much smaller proportionate impact than QE, but the MPC still will be cautious.

The gilt market is less liquid than usual, and the MPC wants a steady programme that won't need tinkering.

We still think the BoE will wait until August to set out plans for sales of £10B per quarter, starting in Q4.

Samuel Tombs (UK Economist)U.K.

25 Apr 2022 Consumers Must Draw on Savings Soon for a Recession to be Averted

March's retail sales figures were a wake-up call for investors; households are struggling to tread water.

Consumers' confidence weakened further in April and now is only a touch above its all-time low.

We still expect a recession to be avoided, but the risk will weigh on the MPC's forthcoming decisions.

Samuel Tombs (UK Economist)U.K.

22 Apr 2022 Which of the Conflicting Indicators of Employment Should Be Believed?

The upward trend in the PAYE measure of employees is more plausible than the flat trend presented by the LFS.

Very strong survey indicators might reflect rising average hours and likely are insensitive to rising quits.

Employment growth looks set to slow from Q2, due to the rise in NICs and weaker demand.

Gabriella DickensU.K.

21 Apr 2022 Stockbuilding will Swing to Depressing GDP Growth Shortly

Firms want to hold more stocks than in the 2010s, but now are accumulating them at a slower pace.

GDP growth depends on the rate of change in inventories, so the deceleration will depress growth.

Futures prices historically have been a better guide to energy prices than assuming they don't change.

Samuel Tombs (UK Economist)U.K.

14 Apr 2022 CPI Inflation will Fall Next Year Almost as Sharply as it Has Climbed

We look for two further 25bp increases in Bank Rate this year, not one, after March's jump in CPI inflation.

CPI inflation looks set to peak at about 9% in April and remain above 8% until the very end of this year.

But energy and core goods inflation will plunge next year; the MPC needn't be as active as markets expect.

Samuel Tombs (UK Economist)U.K.

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