Continuum Economics Calendar August 2024

July 24, 2024 9:15 AM UTC

Data and Events Calendar August 2024.

Short-End Gilts To Discount More Easing?

July 24, 2024 9:15 AM UTC

2yr Gilt yields will likely start declining further after the 1 BOE rate cut (we expect Aug 1), both as BOE communications guide to further cuts in the medium-term and as incoming wage and service inflation provides more comfort to reduce the scale of restrictive policy.  We see 2yr Gilt yields at

UK Household Wealth and the Pension Predicament

July 22, 2024 12:44 PM UTC

Unlike some other parts of the DM world, UK households have seen a serious dent put into their stock of wealth in the last two years.  Indeed, household net worth fell in both 2022 and 2023, both in absolute terms and also as a % GDP (Figure 1).  The 2022 drop was very much a slump in pension fund

UK Labor Market: Far Less Resilient Wage Pressures As Labor Market Loosens Further

July 18, 2024 7:15 AM UTC

As we have underscored repeatedly, the BoE has come to regard the official ONS average earnings data with some suspicion given response rates to the surveys that have fallen towards just 10%.   But the BoE will not be able to dismiss the latest earnings data given that alternative (and more author

UK CPI Review: Inflation Stays at Target and Services Stay Resilient?

July 17, 2024 6:35 AM UTC

As has been made clear by policy-makers, labor market and particularly CPI data are crucial to BoE thinking about the timing and even the existence of any start to an easing cycle.  In this regard the fact that headline CPI inflation dropped back to the 2% target in May is important but far from de

UK Productivity: Starting to Recover - Maybe?

July 15, 2024 2:12 PM UTC

Amid the new government’s economic priority to boost the trend or potential growth rate, any hint that this could be occurring would be welcome and important.  With this in mind, it is notable that after the mild recession in H2 last year, the ‘recovery’ through this year is much clearer than

EZ and UK Government Bonds: Decoupling From the U.S.?

July 12, 2024 9:37 AM UTC

Different economic and inflation dynamics, plus no constraint from trade weighted exchange rates, means that the ECB and BOE can cut irrespective of the Fed in the coming quarters.  This can see 2yr yields decline, though less so in Germany where a 2.5% ECB depo rate is already discounted.  10yr y

UK GDP Review: More Upside Surprises

July 11, 2024 7:02 AM UTC

After the mild recession in H2 last year, the ‘recovery’ now evident is much clearer than any expected with GDP growth notably positive, and with less apparent volatility.  Indeed, coming in more than expected, GDP rose by 0.4% m/m in May accentuating the bounce in the two months prior to the f

UK CPI Preview (Jul 17): Inflation To Stay at Target – An Update on the Policy Outlook?

July 10, 2024 1:51 PM UTC

As has been made clear by policy-makers, labor market and particularly CPI data are crucial to BoE thinking about the timing and even the existence of any start to an easing cycle.  In this regard the fact that headline CPI inflation dropped back to the 2% target in May is important but far from de

UK Election Aftermath: Labour’s Solid Victory

July 5, 2024 5:24 AM UTC

Labour have won a large seat majority, though with a modest vote share.  This should provide political stability in the UK for the next 5 years.  The key question for market remains how the fiscal rule will be meet and how slowly or quickly Labour will take actions to boost long-term growth. 

UK GDP Preview (Jul 11): Questions Continue Regarding How Resilient is the Economy?

July 3, 2024 4:26 PM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is seemingly much clearer than any expected with GDP growth notably positive, albeit with some continued volatility.  Indeed, coming in more than expected, and despite industrial action, GDP rose by

Webinar Recording June Outlook: Cyclical and Structural Forces

July 2, 2024 7:30 AM UTC

UK Markets After The Election: Will Labour Push for Growth Slowly or Quickly?

June 28, 2024 7:14 AM UTC

It is uncertain whether an incoming Labour government in the UK would slowly or quickly take action to boost trend growth and this is the most important question for post-election sentiment towards UK assets.  For the Gilt market, the key is that the BOE actually starts cutting rates and that the 1

Continuum Economics Calendar July 2024

June 26, 2024 10:52 AM UTC

Data and Events Calendar July 2024.

Outlook Overview: Cyclical and Structural Forces

June 25, 2024 10:15 AM UTC

•    The global economy is showing signs of healing, as inflation comes back towards targets and growth recovers momentum in some economies. Nevertheless, the cyclical headwind of lagged monetary tightening remains in DM countries, and will likely be one of the forces slowing the U.S. economy

DM Rates Outlook: Rate Cuts Arrive Except Japan

June 24, 2024 8:45 AM UTC

•    For U.S. Treasuries we see a steady easing process from the Fed from September, which can allow 2yr yields to fall consistently.  However, the decline in H2 2024 will be slower at the long-end from traditional yield curve steepening pressures and then we see fiscal stress in H1 2025 unde

DM FX Outlook: Politics rears its head

June 24, 2024 7:42 AM UTC

·       Bottom Line: The USD strength in Q2 on the back of a less dovish view of the Fed is unlikely to extend over the rest of the year. The JPY remains exceptionally cheap and has potential to recover sharply if risk appetite weakens. A slower JPY recovery is likely if lower inflation leads

BoE Review: MPC Splits Enlarge to Suggest Cut Soon

June 20, 2024 11:48 AM UTC

As widely Bank Rate was kept at 5.25% for the seventh successive MPC meeting this month, with its rhetoric largely unchanged.  But while there were still only two formal dissents, the minutes clearly suggested that for some of the remaining seven members the policy decision at this meeting was fine

UK CPI Inflation Review: Inflation Back at Target

June 19, 2024 6:39 AM UTC

As labor market and particularly CPI data are crucial to BoE thinking about the timing and even the existence of any start to an easing cycle, this further drop in inflation is important but uncertain.  Indeed, largely meeting expectations, CPI headline inflation fell from 2.3% to 2.0% (actually ju

France Debt: Dependent on Non-Residents

June 18, 2024 9:20 AM UTC

Any further major fiscal slippage under a new government could prompt more of a reduction in French government bond exposure, which would likely mean a multi month/quarter risk premia for France and cause spillover difficulties for Italy. It is worth remembering that France is dependent on non-resid

BoE Preview (Jun 20): Data Dependent Easing Bias Makes BoE Decision Unclear

June 12, 2024 10:42 AM UTC

After Bank Rate was kept at 5.25% for the sixth successive MPC meeting last month, Governor Bailey remarked that then market rate pricing may be too cautious.  He also accepted that a rate cut at the next MPC verdict on June 20 was a distinct possibility, but underscored the importance of the data

UK CPI Inflation Preview (Jun 19): Inflation Falls To Target?

June 11, 2024 9:57 AM UTC

It is very clear that labor market and CPI data are crucial to BoE thinking about the timing and even the existence of any start to an easing cycle.  But perhaps the CPI data is the most crucial especially with April’s signs of resilient services (and particularly in regard to eating out) very mu

France Downgrade: Warning for the U.S./UK?

June 5, 2024 9:30 AM UTC

 French politics makes it difficult for President Macron to improve the underlying budget deficit and government debt after the S&P downgrade to AA-.  The National Rally could also do well in this week’s European parliamentary elections and put further pressure on Macron.  Meanwhile, though rat

UK GDP Preview (Jun 12): Fresh Correction on the Cards?

June 3, 2024 1:52 PM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is much clearer than any expected with GDP growth notably positive.  Indeed, coming in more than expected, and despite industrial action, GDP rose by 0.4% m/m in March accentuating the upgraded boun

Continuum Economics Calendar June 2024

May 28, 2024 11:13 AM UTC

Data and Events Calendar June 2024.

UK Sales Weakness Curbing Pricing Power?

May 24, 2024 7:05 AM UTC

Ending an interesting week of UK data, retail sales slumped in April, partly due to what was a wet month.  Notably, sales volumes fell by 2.3% m/m following a broadly flat February and March 2024 and were down by 2.7% y/y and 3.8% below their pre-pandemic level.  This weaker-than-expected outcome

UK: July Election Called

May 22, 2024 4:27 PM UTC

In a somewhat surprise announcement, PM Sunak has called a general election for July 4, somewhat earlier than the autumn timetable that had been previously hinted at.  He is doing so with his Conservative Party lagging severely in the polls.  However, especially after recent local election results

BOE: August Expected But Could be June and Not Enough Discounted

May 21, 2024 11:11 AM UTC

The market is not discounting enough BOE easing in the next 6-18 months during which we see a cumulative 175-200bps of cuts.  The BOE is swinging from a reactive to proactive policy stance and will take account of the prospects of further wage and service inflation slowing.  UK fiscal tightening w

UK Labor Market: Further Signs of Resilient Wage Pressure But Soggier Activity More Notable

May 14, 2024 8:40 AM UTC

As we have underscored repeatedly, the BoE has come to regard the official ONS average earnings data with some suspicion given response rates to the surveys that have fallen towards just 10%.   But the BoE will not be able to dismiss the latest earnings data given that alternative (and more author

UK CPI Inflation Preview (May 22): Inflation to Fall Further and More Broadly

May 13, 2024 12:10 PM UTC

It is very clear that labor market and CPI data are crucial to BoE thinking about the timing and even existence if any start to an easing cycle.  But perhaps the CPI data is the most crucial making the looming April data all the more important for markets as they weigh the chances of an initial rat

Asset Allocation 2024: Tricky Seven Months Remaining

May 10, 2024 1:06 PM UTC

Fed easing expectations for 2025 and 2026 can shift from a terminal 4% Fed Funds rate towards 3%, as the U.S. economy slows due to lagged tightening effects.  Combined with Fed easing starting in September this should mean a consistent decline in 2yr yields.  However, 10yr U.S. Treasury yields wil

BoE Review: Data Dependent Easing Bias Clearer?

May 9, 2024 12:52 PM UTC

There was little surprise that Bank Rate was kept at 5.25% for the sixth successive MPC meeting, nor that the dissent in favor of an immediate rate cut doubled to two as a result of Dep Gov Ramsden confirming more dovish leanings.  The updated projections at least validated the rate path discounted

BoE Preview (May 9): Easing Bias Clearer?

May 2, 2024 11:06 AM UTC

In flagging no need to be dominated by Fed policy, we think that the BoE is not only moving towards rate cuts but the MPC majority may be overtly advertising such a likelihood.  But we do not see any move at the looming May 9 verdict, with Bank Rate again likely to remain at 5.25%. But the accompan

UK GDP Preview (May 10): Fragile Sideways-Moving Activity Continues?

April 30, 2024 2:19 PM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is hardly much better with GDP growth only modestly positive.  Admittedly, coming in as largely expected, and despite industrial action, GDP rose by 0.1% m/m in February accentuating the upgraded 0.

UK Consumers: Rent the Growing Hit to Spending Power

April 29, 2024 2:02 PM UTC

The UK has faced a series of cost-of-living shocks in the last few years.  Some such as the surge in food prices may even be reversing, while it now looks likely the BoE hiking cycle may also start to reverse, although rising market rates may mean little further fall in effective mortgage rates in

Headwinds To Long-term Global Growth

April 26, 2024 9:30 AM UTC

Bottom line: While much focus is on the cyclical economic position to determine 2024 monetary policy prospects, the 2025-28 structural growth trajectory differs to the pre 2020 GDP trajectory for major economies.  While global fragmentation has a role to play, aging populations are already having a

Short-end European Government Bonds Following U.S. But June Decoupling

April 22, 2024 1:15 PM UTC

The Fed’s shift to higher for longer has spilled over to drag European government bond yields higher through April.  This now looks overdone as a June ECB rate cut is not fully discounted and ECB officials/data clearly point towards a 25bps cut.  UK money markets are more out of line, with a Jun

Markets: Fed Rather Than Middle East Worries

April 17, 2024 12:34 PM UTC

Global markets are being driven by a scale back in Fed easing expectations and we see a 5-10% U.S. equity market correction being underway.  However, with the market now only discounting one 25bps Fed cut in 2024, any downside surprises on U.S. growth or better controlled monthly inflation numbers

UK GDP Review: Less Fragile Recovery to Fuel BoE Hawks?

April 12, 2024 6:50 AM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is hardly much better with GDP growth only modestly positive.  Admittedly, coming in as largely expected, and despite industrial action, GDP rose by 0.1% m/m in February accentuating the upgraded 0.

How Durable are Better UK Housing Market Signs?

April 11, 2024 9:45 AM UTC

Amid some mixed remarks from one the MPC hawks, the BoE will be noting more positive housing market signs.  The latest RICS survey very much points to a clear pic-up in housing demand, something that chimes with the results in the just-published BoE Credit Conditions Survey (CCS), which also sugges

UK CPI Inflation Preview (Apr 17): Inflation to Fall Broadly Further, But Momentum Still Evident

April 8, 2024 2:12 PM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is hardly going to feel much better with GDP growth hardly positive.  Admittedly, coming in as largely expUK headline and core inflation have been on a clear downward trajectory in the last few mont