Long-term Real Yields’ Decline Implies Stagflation

Sep 12, 2014 | UK

Yield curves almost everywhere have been flattening.  At the long end of yield curves, bonds have been rallying all year.  This is to be expected in Europe, where growth remains lacklustre, inflation is very weak, and the ECB is firmly in easing mode.  However, even...

UK: The current account deficit is growing and looking more entrenched

Apr 30, 2014 | UK

Much has been made of the made of Chancellor George Osborne’s success with austerity and the UK’s eruption back into growth, confounding his critics.  However, ‘austerity’ has been more of a publicity exercise.  Government spending as percentage of GDP has fallen only...

Cyclical upside intact in the UK, structural challenges remain

Mar 11, 2014 | Featured, UK

We have seen strong coincident activity in the UK in recent months, helped in part by a government-engineered boost to the housing market, which has lifted consumer spirits and caused retail sales to surge.  Our leading indicator anticipated this upturn in the...

Inflation to hold UK recovery back

Nov 11, 2013 | European Economy, Featured

There are some notable reasons for near-term reasons for optimism in the UK.  The housing market seems to be picking up, industrial production growth is looking up together with PMI data and the equity market has done well. All these are real and significant signs of...

Recovery to be short-lived in the UK

Sep 13, 2013 | European Economy, Featured, Global Economy, UK

Data in the UK have taken an unequivocally positive turn.  PMIs for services, construction and manufacturing are at 3 year highs.  Furthermore, the underlying picture is healthy, with the new orders to inventory ratio for manufacturing surging to 1.4.  This has...

UK’s current account deficit worst in G10; weaker GBP on cards

Jul 19, 2013 | UK

Data in the UK has been broadly positive, with much fanfare over revised GDP data showing the UK avoided the dreaded ‘double dip’.  This is a trivial distinction; the reality is the UK is still bumping along the bottom.  Manufacturing remains stuck in a hole, and...

UK’s Action Signals Move Closer to Fiscal Dominance

Nov 27, 2012 | Featured, Fiscal Policy, UK

The UK Treasury’s decision to transfer coupon income from the Bank of England’s Asset Purchase Facility is a step towards ‘fiscal dominance’, where the fiscal authority ultimately gains the upper hand from the central bank and we see monetisation of public sector...

Sterling’s rally to peter out on rising inflation

May 10, 2012 | European Economy, UK

The Mexican peso is the only major currency to have appreciated against sterling this year (and then only by less than 1%). The trade-weighted sterling is the highest it has been since late 2008, when the currency was in the midst of its epochal devaluation. The...

UK: From Fixed to Floating; Mortgage Types Highlight Stress Ahead

Apr 13, 2012 | UK

Despite an historic low Bank of England base rate, the spread between the standard variable rate (SVR) for mortgages in the UK and the base rate widened significantly in the aftermath of the financial crisis, and has continued to trend higher. Fixed rate deals in the...