- The MPC would ease monetary policy again in the unlikely event that another lockdown is imposed.
- Fiscal policy would be less supportive than in previous lockdowns; new curbs would dampen inflation.
- Negative rates are in the toolkit and are preferred to more QE; Bank Rate likely would be cut to -0.25%.
Samuel Tombs (UK Economist)U.K.
- Recent activity data have surprised to the upside, but the Omicron variant casts a shadow over Q1.
- The near-term path for inflation looks much higher than a month ago, after October's above-consensus data.
- The MPC likely will hike Bank Rate in December, but markets' expected 2022 rate path looks far too steep.
Samuel Tombs (UK Economist)U.K.
- The 0.6% m/m rise in payroll employee numbers in October implies unemployment didn't rise post-furlough...
- ...But the drop in median pay in October suggests many furloughed staff have returned only part-time.
- Year-over-year growth in wages continued to slow in September; no sign of a wage-price spiral forming.
Samuel Tombs (UK Economist)U.K.
- Nearly 4% of all staff still were furloughed in September, yet redundancies appear to have remained low.
- Involuntarily part-time working, however, likely became much more widespread in Q4.
- October's labour market data will be partial and might not offset concerns about the recovery's strength.
Samuel Tombs (UK Economist)U.K.
- On balance, we still think the MPC won't act next month; Mr. Bailey hinted October's labour data may not suffice.
- The MPC's inflation forecasts seemingly support markets' view that rates will rise to 1.0% by the end of 2022...
- ...But they are based on implausible energy price figures; its spare capacity forecasts point to a lower rate path.
Samuel Tombs (UK Economist)U.K.
- The OBR likely will revise smaller its "scarring" estimate only to 2.5% of GDP, from 3.0% previously.
- The resulting uplift to future tax revenues will be offset by higher projections for interest payments.
- Mr. Sunak will have little, if any, headroom in meeting his target for a balanced current budget in three years' time.
Samuel Tombs (UK Economist)U.K.
- The labour market continued to tighten in Q3, but employment and hours still were below their potential.
- Labour supply likely has increased much more than labour demand in Q4, now that the CJRS has ended.
- Unit wage costs were kept in check by a productivity rebound; rising labour supply will cool wage growth in Q4.
Samuel Tombs (UK Economist)U.K.
- Furlough scheme usage fell only marginally in August; 4.6% of staff still were furloughed by month-end.
- Furlough rates remain high at small businesses, who lack the financial muscle to bring all staff back.
- We expect only a modest rise in the unemployment rate to 5% in Q4, but a big jump in underemployment.
Samuel Tombs (UK Economist)U.K.
- The MPC won't hike Bank Rate until it has assessed the impact of the closure of the furlough scheme.
- It will have October's Labour Force Survey data to hand at its meeting on December 16...
- ...But that wouldn't allow time to prepare the public, as usual; February is the earliest practical lift-off date.
Samuel Tombs (UK Economist)U.K.
- The ONS estimates that underlying year-over-year growth in wages was between 3.6% and 5.1% in July...
- ...We expect an increase in labour market slack, post-furlough, to push this rate down to about 3.2%.
- Employers will pass on higher NICs rates to staff, while public sector pay will rise only modestly next year.
Samuel Tombs (UK Economist)U.K.
Markets now expect the MPC to raise Bank Rate twice next year, with the first hike as soon as February.
The MPC, however, will focus on labour market slack and the prospects for its elimination, not just inflation.
The recovery has faded, implying many furloughed staff will be underemployed in Q4; the MPC needn't rush.
Samuel Tombs (UK Economist)U.K.
- Payroll employee numbers returned in August to their pre-Covid peak, but will dip in Q4, after furlough ends.
- We expect the unemployment rate to rise to 5.0% in Q4, from 4.5% in Q3; slack within firms will build too.
- Three-month-on-three-month annualised growth in wages fell to 3.2% in July; slack will keep it in check.
Samuel Tombs (UK Economist)U.K.
- The number of workers on furlough decreased again in July, as government contributions were tapered...
- ...But usage remains high in sectors that already have fully recovered, and among financially-weak SMEs.
- We expect the unemployment rate to rise to 5.0% in Q4, from 4.5% in Q3; hidden slack will rise much more.
Samuel Tombs (UK Economist)U.K.
- Households' stock of excess savings rose in July to 8.3% of 2020 GDP, after another cautious month.
- The proportion of credit card debt repaid rose to a record high; ad hoc mortgage payments were high too.
- Businesses aren't borrowing either, though capex still looks set to recover from rock-bottom levels in 2022.
Samuel Tombs (UK Economist)U.K.
- The margin by which public borrowing undershoots the OBR's forecast will narrow over coming months...
- ...Interest payments will soar, while GDP growth in Q3 and Q4 will fall short of the OBR's expectations.
- The OBR's scarring judgement looks sound; productivity and participation have been lower than expected.
Samuel Tombs (UK Economist)U.K.
- Employee numbers have rebounded since the spring, but total employment is lagging behind.
- Vacancies are high, but are concentrated in different sectors to those which will see post-furlough layoffs.
- High inflation and 4-to-5% unemployment didn't lift wage growth in 2017, and probably won't this time.
Samuel Tombs (UK Economist)U.K.
The proportion of staff furloughed fell to 5.7% at the end of June, from 7.5% a month earlier...
...But surveys point to only a marginal fall in early July, and still high usage in fully recovered sectors.
Firms likely won't fully relinquish recent productivity gains; the employment rate will drop back in Q4.
Samuel Tombs (UK Economist)U.K.
The ONS' Business Impact of Covid-19 survey suggests business turnover has flatlined since late May.
The disruption caused by the "pingdemic" wors- ened in late July, but likely is now starting to fade.
Unemployment still looks set to jump in Q4, despite another hefty drop in furlough scheme usage in June
Samuel Tombs (UK Economist)U.K.
We continue to think that the government will need to press ahead with its planned fiscal tightening over the next two years, if it wants to ensure that borrowing drops to 3% of GDP in the mid-2020s.
Samuel Tombs (UK Economist)U.K.
