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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sterling

12 Jan 2023 UK Monitor CPI Inflation Likely Undershot the MPC's Forecast Again in December

  • CPI inflation likely fell to 10.3% in December, from 10.7% in November, a hefty 0.6pp below the MPC’s forecast.
  • Motor fuel prices plunged in December, while flash Eurozone data point to a further slowing in food price rises.
  • Evidence is mixed on core goods price momentum, but the usual surge in airfares won’t lift the services CPI much.

Samuel Tombs (UK Economist)U.K.

28 Nov 2022 UK Monitor Sterling is Not Out of the Woods Yet

Sterling's rally has been driven by the elimination of the fiscal risk premium, which we doubt will return... 

...But the current account deficit will remain large next year, despite the recession, leaving sterling vulnerable. 

The MPC likely will hold back from raising Bank Rate as far as markets expect; we look for $1.15 in the spring. 

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.

7 Oct 2022 UK Monitor Don't Expect Net Trade to Boost GDP Much if Sterling Falls Further

  • Sterling’s depreciation to date is too small to materially boost net trade or shrink the current account deficit.
  • Most exporters price in foreign currencies, due to their reliance on imports; competitiveness won't improve.
  • Britain’s demand for imports is price insensitive; firms won't invest in extra capacity to out-compete imports.

Gabriella DickensU.K.

4 Oct 2022 UK Monitor Forecast Review, A Recession Induced by Policymakers Lies Ahead

  • We now look for a 1.5% year-over-year drop in GDP in 2023, worse than our prior forecast for a 1.2% decline.
  • The Energy Price Guarantee has shored up real in- comes, but the tax cuts are counterproductive, net...
  • ...The hit from the resulting drop in sterling and rise in mortgage rates will outweigh the direct fiscal boost.

Samuel Tombs (UK Economist)U.K.

28 Sept 2022 UK Monitor Surveys Point to a Small Drop in GDP in Q3, but this is Just the Start

  • PMI and confidence data for September suggest GDP edged down for a second consecutive quarter in Q3.
  • The downturn will gather momentum, as borrowing costs for households and businesses soar.
  • We now look for a 1.5% year-over-year decline in GDP in 2023, and CPI inflation not to return to 2% until 2025.

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.

16 Sept 2022 UK Monitor The Improved Inflation Outlook Implies the MPC will Stick to a 50bp Hike

  • We think the MPC will raise Bank Rate by 50bp next week, despite other central banks rushing ahead...
  • ...Q3 GDP is set to undershoot the MPC’s latest forecast, while the inflation outlook has improved greatly.
  • Proposed tax cuts are too small to move the inflation needle, and likely will be partly funded by spending cuts.

Samuel Tombs (UK Economist)U.K.

15 Sept 2022 UK Monitor Will the Better News on CPI Inflation Keep Coming?

  • The month-to-month change in the August core CPI exceeded its seasonal norm by the least this year.
  • The recent decline in commodity prices suggests core CPI inflation will fall sharply next year.
  • Services inflation will be stickier, but the current support from energy price rises and VAT changes will fade.

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.

24 Aug 2022 UK Monitor Flash PMIs Suggest the Economy is Stagnant at Best

August’s PMIs suggest the recovery has petered out, with the manufacturing sector heading into recession.

Employment growth also has come off the boil, while price pressures mostly have continued to ease.

All this suggests the MPC have room to act with caution; a 50bp hike is not the done deal assumed by markets.

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.

16 Aug 2022 UK Monitor A Growing Trade Deficit will Increase Reliance on the Kindness of Strangers

The trade deficit has hit a record share of GDP over the last two quarters, but it will only get worse.

Goods imports will fall, as firms now have excess stock, but the value of energy imports will surge this winter.

The U.K.'s shortfall in exports relative to 2018 remains the largest in the G7; Brexit is largely to blame.

Samuel Tombs (UK Economist)U.K.

21 July 2022 UK Monitor June's CPI Data Unlikely to Spur the MPC to Hike by 50bp Next Month

The headline rate of CPI inflation topped the MPC forecast in June, due to higher motor fuel and food prices.

But the core rate fell, undershooting its forecast, as retailers struggled to pass on higher producer prices.

Core CPI inflation will fall sharply early next year, when recent falls in commodity prices will feed through.

Samuel Tombs (UK Economist)U.K.

15 July 2022 Sterling is Vulnerable, Due to the Colossal Trade Deficit

The trade deficit remained extremely large by past standards in May, driven by a surge in imports.

We expect the deficit to remain huge over the rest of the year; it is on track to be the biggest since the 70s.

Tory candidates tax pledges would have to be very large in order to alter the economic outlook materially.

Gabriella DickensU.K.

5 July 2022 Forecast Review: The Inflation Roller Coaster has Become Even Steeper

The MPC and consensus still aren't downbeat enough on Q2 GDP; we look for a 0.7% quarter-on-quarter drop.

CPI inflation now looks set to approach 11% in October, driven by further huge rises in food and energy prices...

...But wage growth and inflation expectations haven’t risen, while producer price inflation now is set to plunge.

Samuel Tombs (UK Economist)U.K.

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