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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wage

17 Aug 2022 UK Monitor Labour Market Slack will Continue to Build, Easing Wage Pressures

Growth in employment in the three months to June undershot the consensus by the most in nearly two years.

The workforce, by contrast, is finally picking up, assisted by a recovery in immigration, which will be maintained.

Vacancy and payroll employee data indicate labour demand is stagnating; unemployment will rise further.

Samuel Tombs (UK Economist)U.K.

11 Aug 2022 UK Monitor June Official Data to Confirm the Labour Market No Longer is Tightening

PAYE data, vacancy figures and business surveys all suggest employment growth slowed in June and July.

Labour supply, however, is picking up; the unemployment rate likely was marginally higher in Q2 than in Q1.

Wages likely continued to rise in June at a rate inconsistent with the inflation target, but probably didn't speed up.

Samuel Tombs (UK Economist)U.K.

10 Aug 2022 UK Monitor Rate Cuts Next Year? Don't Price Them In Until Q4 2023 at the Earliest

Dave Ramsden is the first MPC member to admit rates might need to be cut "quite quickly" in the medium term.

The cuts currently priced-in by markets from late H2 2023 aren't big enough to lower households' interest bill.

But CPI inflation won't be near the target until Q4 2023; pre-election fiscal stimulus will limit the scope for easing.

Samuel Tombs (UK Economist)U.K.

25 July 2022 UK Monitor PMI Data Imply no Need for the MPC to act "Forcefully" Next Week

PMI data for July show that the recovery in GDP has nearly ground to a halt and inventory is piling up.

Employment growth slowed to a 15-month low, while the pace of input and output price rises eased materially.

On balance, the latest data imply the MPC won't act "forcefully"; market pricing for August is still too high.

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.

20 July 2022 Reviving Workforce Growth Eases the Pressure for Large Rate Hikes

The Governor emphasised at Mansion House that the drop in the workforce has been a key driver of rate rises.

So its 0.8% 3m/3m rise in May, the largest since 1984, should ensure the MPC sticks to a 25bp hike in August.

The workforce has scope to rebound further, while vacancy and survey data imply job growth will slow.

Samuel Tombs (UK Economist)U.K.

13 July 2022 Expect More Signs of a Loosening Labour Market Next Week

We think employment grew at a steady 0.5% threemonth-on-three-month pace in May.

But expect even faster growth in the workforce to mean that the unemployment rate edged up again.

Surveys suggest wage growth had no more momentum in May than in prior months.

Gabriella DickensU.K.

8 July 2022 The Plunge in Commodity Prices has Improved the 2023 Inflation Outlook

June's Decision Maker Panel Survey shows firms' expectations for price and wage rises have increased.

But households' inflation expectations have fallen back, and more importantly, commodity prices have plunged.

Core goods CPI inflation will turn negative next year, helping to return the headline rate to 2% by late 2023.

Samuel Tombs (UK Economist)U.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.

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.

15 June 2022 Stable Wage Growth and a Reviving Workforce will Cheer the MPC

Year-over-year growth in private-sector wages slowed to 4.7% in April, slightly below the MPC’s 4.8% forecast.

The job market no longer is tightening, as the workforce recovers and growth in employment starts to slow.

We still expect the workforce to recover further, anchoring wage growth and easing the pressure for rate hikes.

Samuel Tombs (UK Economist)U.K.

31 May 2022 A Rebound in the Workforce will Help to Contain Wage Growth

The labour market currently is very tight, largely due to a sharp decline in the size of the workforce.

We think, however, that around half of that decline will reverse by end-2023, keeping a lid on wage pressures.

This is one reason why we think the MPC will hike Bank Rate by less than markets expect.

Gabriella DickensU.K.

30 May 2022 How will the MPC Respond to the Chancellor's Support Measures?

Mr. Sunak's measures will boost households' nominal incomes in H2 by 2% and nominal GDP by about 0.7%.

The medium-term impact, however, will be small, and the package is so timely the MPC can't feasibly offset it.

So the outlook for Bank Rate hasn't changed radically; we now expect it to rise to 1.50%, not 1.25%, this year.

Samuel Tombs (UK Economist)U.K.

27 May 2022 The Chancellor's Extra Measures Meaningfully Reduce Recession Risk

The £15B support package is hefty, timely and targeted; it offsets most of October’s £24B energy bill rise.

The extra cash likely will lift GDP by 0.7% in the second half of this year; this matters for monetary policy.

Strikes will become more common over the coming months, but won’t tip the balance towards recession.

Samuel Tombs (UK Economist)U.K.

18 May 2022 The Latest Wage Growth Figures Won't Make the MPC Panic

  • Average wages in Q1 were boosted by bonuses; ex-bonus growth has merely matched the MPC’s forecast. 
  • The sharp rise in average hours has boosted weekly wages too; underlying pay pressures are manageable.
  • We expect the labour market to stop tightening soon, as both the participation rate and immigration rise.

Samuel Tombs (UK Economist)U.K.

12 May 2022 Negligible Employment Growth in Q1, Despite Strong Surveys?

The LFS measure of employment was essentially unchanged in Q1, despite the strength implied by surveys.

But the unemployment rate probably fell to a 47-year low of 3.7%, due to a contraction in the workforce.

Headline wage growth likely edged up, but remained well below CPI inflation; this gap will persist.

Gabriella DickensU.K.

3 May 2022 Forecast Review, The Near-Term Outlook for GDP Has Worsened

The near-term outlook for households' real disposable income looks bleak; we still expect GDP to drop in Q2.

A recession, however, isn't our base case; people have ample scope to draw on savings and to borrow more.

We now Bank Rate to top out at 1.25% this year, not 1.00%, but still think markets have lost the plot.

Samuel Tombs (UK Economist)U.K.

13 Apr 2022 A Recovery in the Workforce will Limit Wage Pressures in 2022

Employment started to rise again in the three months to February, having fallen in December and January.

The workforce should start to recover this year, reflecting a decline in inactivity and a rise in immigration.

Alongside slower labour demand growth this should mean wages continue to rise more slowly than prices.

Samuel Tombs (UK Economist)U.K.

7 Apr 2022 February Data to Show the Recovery in Employment Is Back on Track

We look for a three-month-on-three-month rise in employment of about 30K in February.

Another cohort with a high employment rate left the sample, but surveys signal solid underlying momentum.

The PAYE measure of median pay and settlements data, however, suggest wage growth stayed subdued.

Gabriella DickensU.K.

18 Mar 2022 Markets Likely to be Caught on the Hop Again by the MPC's Dovishness

  • Markets' rate expectations fell sharply in response to the crumbling of hawkish dissent on the Committee.
  • The MPC now is more worried about the impact of high inflation on demand than on inflation expectations.
  • We continue to expect the MPC to stop hiking this year once Bank Rate has reached 1%.

Samuel Tombs (UK Economist)U.K.

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