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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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.

16 June 2022 The Trade Deficit is On Course to be the Largest Since the Mid-Seventies

The trade deficit was huge by past standards in April, despite narrowing to £8.5B, from £11.6B in March.

Import values have surged as fuel prices have shot up, while Brexit is continuing to weigh on exports.

We expect the largest trade deficit since the mid-70s in 2022, leaving sterling vulnerable to depreciate further.

Samuel Tombs (UK Economist)U.K.

19 May 2022 The Outlook for CPI Inflation Doesn't Warrant Rapid Rate Hikes

Higher energy prices and tax rises pushed up the headline rate of CPI inflation to a 40-year high in April.

But there were encouraging signs that retailers are starting to absorb some of the surge in producer prices.

Inflation will ease over the summer as base effects kick in and the real income squeeze inhibits services price rises.

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.

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.

20 Apr 2022 The RPI-CPI Wedge will Return to its Pre-Covid Norm Next Year

RPI inflation will rise even more than CPI inflation in April, due to the bigger weighting of energy prices.

But house price growth is about to slow, while mortgage interest payments will rise only slowly.

Weighting differences point to a bigger drag on RPI inflation from falling energy prices next year.

Samuel Tombs (UK Economist)U.K.

19 Apr 2022 The Recent Strength in House Price Growth Won't Last Much Longer

House price growth was strong in Q1, but will now slow, due to rising mortgage rates and falling real incomes.

Several timely indicators of demand, including the RICS new buyer enquiries balance, are starting to soften.

House price growth looks set to slow to 4.5% this year, and mortgage approvals will fall to pre-Covid levels.

Gabriella DickensU.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.

6 Apr 2022 Falling Health Sector Output Likely Caused GDP to Drop in February

Output in the consumer services sector recovered strongly in February, assisted by fading Covid fears.

...But output in the health sector likely fell considerably, due to sharp falls in Covid testing and vaccinations.

Manufacturing output was hit by a slump in car production, while building work was disrupted by storms.

Samuel Tombs (UK Economist)U.K.

29 Mar 2022 The Momentum Behind the Recovery in Q1 won't be Sustained

  • 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.

25 Mar 2022 CPI Inflation Still Set to Exceed 8% Comfortably, Despite Budget Tweaks

  • February's CPI inflation data won't panic the MPC, services inflation merely matched its long-run average.
  • The further surge in oil prices and producer prices suggests that CPI inflation will rise to 8.6% in April...
  • ...and will rise to a similar rate in October, after easing in Q3; the MPC, however, will worry more about demand.

Samuel Tombs (UK Economist)U.K.

15 Mar 2022 This Year's Trade Deficit will be the Largest Since the Late 1980s

  • January's record large trade deficit was not just due to erratic items; higher energy prices are partly to blame.
  • U.K. exporters also are continuing to lose market share; no reason to expect a turnaround this year.
  • Imports will continue to rise quickly, driven by higher energy prices and the recovery in outbound tourism.

Gabriella DickensU.K.

22 Feb 2022 The PMI Points to a Swift Recovery from Omicron and Solid Q1 Growth

  • 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.

17 Feb 2022 Inflation Data Bolster the Case for Rate Hikes, but not 50bp in One Go

  • 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.

3 Feb 2022 Will Supply Constraints Continue to Ease, Reducing Inflation Risk?

  • 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.

1 Feb 2022 The Trade Deficit Will Widen this Year, Increasing Sterling's Vulnerability

  • The overall trade deficit will more than double in 2022, as the value of natural gas imports surges...
  • ...And the structural deficit in travel and transportation services gradually re-emerges.
  • Financial inflows will pick up too, supporting sterling, but another risk-off episode would hurt the pound.

Samuel Tombs (UK Economist)U.K.

28 Jan 2022 Will the MPC Endorse the Upward Shift in the Market Rate Curve?

  • 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.

25 Jan 2022 January's Lower Composite PMI won't Distract the MPC

  • 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.

20 Jan 2022 The MPC will React Immediately to December's Blowout CPI Figure

  • 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.

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