The boost to activity from the removal of final Covid restrictions likely was offset by falling health sector output.
Higher energy prices and fresh supply chain frictions, following the war in Ukraine, likely hit manufacturing.
Retail sales and car sales fell, while the recovery in the hospitality sector appears to have topped out.
Samuel Tombs (UK Economist)U.K.
The estimate of public borrowing in 2021/22 almost certainly will be revised down over the coming months.
But we think public borrowing is on course to overshoot the OBR's forecast in 2022/23 and beyond.
The OBR's assumption that productivity will grow at double the pace seen in the 2010s is implausible.
Samuel Tombs (UK Economist)U.K.
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.
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.
- Slowing money supply growth and households' continued reluctance to deplete savings are worrying signs...
- ...But real expenditure could still rise this year if the recovery in unsecured borrowing gathers momentum.
- Mortgage approvals have further to fall this year, but remortgaging activity should remain strong.
Samuel Tombs (UK Economist)U.K.
- The latest data suggest that GDP increased by 0.9% in Q1, despite the Omicron hit at the turn of the year...
- ...But lower health spending, an extra bank holiday and falling real incomes will weigh on the recovery in Q2.
- The MPC, therefore, likely will refrain from raising Bank Rate later this year, after a final hike to 1.00% in May.
Samuel Tombs (UK Economist)U.K.
- January's rebound should ensure GDP rises by nearly 1% q/q in Q1, far exceeding the MPC's expectations.
- But Test & Trace and vaccination activities boosted GDP by 2% in January; this support soon will gone.
- Q2 GDP also will be hit by the extra bank holiday and a sharp fall in real incomes; we look for a 0.2% q/q drop.
Samuel Tombs (UK Economist)U.K.
- We look for a 0.5% month-to-month rise in January GDP, well above the 0.1% consensus.
- Retail sales and car sales jumped, while Covid afflicted sectors staged a partial recovery.
- The hit to health sector output from falling Covid jabs and tests was offset by a jump in non-Covid activities.
Samuel Tombs (UK Economist)U.K.
- Money supply growth is weaker than before Covid, signalling macro policy isn't excessively loose.
- Households have remained unwilling to draw on their "excess savings" to support consumption.
- House purchase mortgage approvals in January were 11% above their 2015-to-19 average, but will dip soon.
Samuel Tombs (UK Economist)U.K.
- We think that year-over-year growth in the workforce will pick up to 1.0% by the end of 2022...
- ...Driven by the reversal of half of the rise in inactivity since early 2020, and a recovery in immigration.
- The number of hours workers are willing to supply also will rise in response to the drop in real wages.
Samuel Tombs (UK Economist)U.K.
- Markit's composite PMI points to brisk GDP growth in Q1; the Omicron hit has faded quickly.
- Other indicators, however, including the ONS' BIC survey, are less upbeat, so we expect 0.6% q/q growth.
- Output prices in the manufacturing and services sec- tor are still surging; a March rate hike is a done deal.
Samuel Tombs (UK Economist)U.K.
- January's 5.5% rate of CPI inflation only just exceeded the MPC's 5.4% forecast; the surprise was all in goods.
- Services inflation is only slightly above its long-run average; the MPC needn't panic.
- The headline rate likely will peak at 7.7% in April, but then fall swiftly, potentially undershooting the target in 2023.
Samuel Tombs (UK Economist)U.K.
- The labour market is tight on every measure, but employment growth is slowing and wages aren't soaring.
- The first estimate of month-to-month growth in employee numbers in January was the lowest since April.
- Wages will be supported by low unemployment, but undermined by higher taxes and slowing job moves.
Samuel Tombs (UK Economist)U.K.
- Easing supply constraints and labour shortages should boost the recovery in construction in H1 2022.
- Further ahead, falling real incomes and increases in mortgage rates will dampen housebuilding activity...
- ...Even so, we expect construction output by year end to be about 1.5% above its 2019 average level.
Gabriella DickensU.K.
- Real household disposable income looks set to drop by nearly 2% this year, the most since 1977...
- ...But consumers can draw on the savings they amassed during the pandemic and borrow more.
- We expect the saving ratio to fall to 4.5% in 2022—1.5pp below its pre-Covid level—so that spending rises further.
Samuel Tombs (UK Economist)U.K.
- Supply chain disruptions, bottlenecks and goods and labour shortages have limited the recovery...
- ...But the last month has brought signs of progress of all fronts, despite the surge in Covid-19 infections.
- Supply disruptions should continue to ease, but labour shortages probably will be more persistent.
Gabriella DickensU.K.
- Growth in the broad money supply reverted to its pre-Covid rate in Q4, despite very low interest rates.
- Households dipped into their excess savings in December to maintain their spending, not increase it.
- Mortgage refinancing will cease to boost disposable incomes in 2022; the effective rate will stabilise.
Samuel Tombs (UK Economist)U.K.
- The MPC likely will hike Bank Rate next week, but the 95% probability priced-in by markets looks too high.
- The MPC warned in November that spare capacity would emerge if rates rose as far as markets expected…
- ...The curve is up 30bp since, with no cause for greater medium-term optimism; beware another dovish nudge.
Samuel Tombs (UK Economist)U.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.
- The Tories now trail Labour by 10pp in the polls; a no-confidence vote in Johnson is a growing possibility.
- Markets probably would prefer a more predictable successor who had a less combative Brexit stance...
- ...But the gap between the Tories and Labour on economic policy has narrowed.
Samuel Tombs (UK Economist)U.K.
