- The composite PMI edged down in January; other indicators signal a further month-to-month fall in GDP too.
- The MPC, however, will be encouraged by the pick-up in the forward-looking components of Markit's survey...
- ...and concerned by signs the labour market is continuing to tighten quickly and services inflation still is rising.
Samuel Tombs and Gabriella DickensU.K.
- We are bringing forward our forecast for the next two increases in Bank Rate, following December's CPI data.
- While food, energy and goods prices are mainly to blame for high inflation, services inflation has risen too.
- CPI inflation, however, will fall sharply in H2 and should be below target in 2023, curtailing the hiking cycle.
Samuel Tombs (UK Economist)U.K.
- GDP surpassed its pre-Covid level in November, albeit with support from some unsustainable sources.
- Omicron has temporarily set the economy back, but GDP should return to November's level by March.
- Thereafter, however, GDP growth likely will be slow, due to the squeeze on households' disposable incomes.
Samuel Tombs (UK Economist)U.K.
- CPI inflation probably was unchanged at 5.1% in December, giving the MPC some breathing space.
- Pick-ups in food and used car price inflation likely were offset by falls in the tobacco and clothing components.
- The seasonal surge in plane ticket prices will boost the CPI less than usual, because its weight has shrunk.
Samuel Tombs (UK Economist)U.K.
- We think that GDP increased by about 0.6% month-to-month in November, above the 0.4% consensus.
- Easing supply-chain blockages seem to have facilitat- ed pick-ups in manufacturing and construction output.
- Growth in services output was supported by increas- es in retail sales, transport usage and vaccinations.
Samuel Tombs (UK Economist)U.K.
- In one line: Omicron weighed heavily on consumer services in December.
Samuel Tombs (UK Economist)U.K.
- The default tariff energy price cap looks set to rise by 47% in April, pushing up CPI inflation to 6.2%.
- The rise will be larger, if suppliers are immediately compensated for acquiring failed competitors' customers.
- Removing VAT would limit the inflation peak to 6.0%; a supplier loan scheme could have a bigger impact.
Samuel Tombs (UK Economist)U.K.
- The return of monthly saving to pre-Covid levels is a sign of the real income squeeze, not surging spending.
- The recent surge in house prices, however, is enabling refinancing homeowners to access lower interest rates.
- Firms continued to repay external borrowing in November, but we remain upbeat on the capex outlook.
Samuel Tombs and Gabriella DickensU.K.
- Consumer caution in response to Omicron points to a near-1% fall in GDP between November and January.
- Surging energy prices have forced us to revise up our forecast for this year's peak rate of CPI inflation to 6.0%.
- The MPC, however, likely will wait until March to hike rates again, given the large hit to activity from Omicron
Samuel Tombs (UK Economist)U.K.
- Omicron cases have leapt, but little still is known about the hospitalisation rate; new curbs aren't inevitable.
- Even with no new restrictions and low Omicron severity, GDP likely will be 1% lower in January than in November.
- Expect a 2% hit to GDP from a return to "Step Two" rules, and a 6% hit if a full lockdown is imposed.
Samuel Tombs (UK Economist)U.K.
Markets now expect the MPC to hike Bank Rate to 0.50% in February, following today's surprise hike.
Most members, however, thought the decision was "finely balanced" and see a "modest" tightening ahead.
Omicron won't just have short-term effects if the MPC hikes again and pushes firms over the edge.
Samuel Tombs and Gabriella DickensU.K.
November's 5.1% CPI inflation rate was 0.6pp above the forecast made by the MPC only last month...
...But high inflation is due to surging energy and goods prices; underlying services inflation remains subdued.
We expect the headline rate to peak at 6.0% in April, but then to fall sharply, slipping below-target in 2023.
Samuel Tombs and Gabriella DickensU.K.
The unemployment rate continued to fall in October, despite the end of the furlough scheme.
Some full-time workers have become part-timers post-furlough, but they don't seem to want more hours.
Wage growth, however, slowed to a below-inflation rate in October; the real wage squeeze will get worse.
Samuel Tombs and Gabriella DickensU.K.
Trade-weighted sterling has fallen by about 2% since late October; bets on a further drop have intensified.
The U.K. economy is more Covid sensitive than most; the downside risk to rate expectations is greater.
Investors next year increasingly will price-in the risks of a messy outcome to the next general election.
Samuel Tombs and Gabriella DickensU.K.
- October's mere 0.1% m/m increase in GDP shows the recovery had little momentum before Omicron.
- GDP was near its pre-Covid level only due to surging health activities; private sector GDP was 2.4% adrift.
- A pullback in consumer services spending will depress GDP over the winter; no rate hike before March.
Samuel Tombs (UK Economist)U.K.
- The MPC likely will hold back from raising Bank Rate next week, despite several upside data surprises.
- We are cutting our forecast for quarter-on-quarter GDP growth in Q1 to 0.3%, from 0.8%, due to Omicron.
- The Covid situation won't be better in early February; the March meeting is a better bet for the first rate hike.
Samuel Tombs (UK Economist)U.K.
- CPI inflation likely rose to 4.8% in November—0.3pp above the MPC's forecast—from 4.2% in October.
- Used car prices still are rising rapidly, while supermar- kets are passing on higher food prices to shoppers.
- Tobacco prices were lifted by a duty hike, while cloth- ing CPI inflation likely was boosted by a base effect.
Samuel Tombs (UK Economist)U.K.
- The recent measures implemented by the government will have limited direct impact on the economy...
- ...But near-real-time data already show consumers are pulling back a bit in response to the new variant.
- A "lockdown lite" set of restrictions could subtract 1.5% from Q1 GDP; expect a 6% hit with a full lockdown.
Samuel Tombs and Gabriella DickensU.K.
