Economic voice

The Real Economy

Every week, RSM UK’s economist Tom Pugh will examine the key events on the UK’s economic calendar and outline the impact that they’ll have on middle-market businesses. He also works with RSM colleagues across the pond to see what influence changes in the US may have on the UK market, giving a comprehensive overview of the economic issues mid-market leaders need to be aware of.

Treasury and BoE pulling in opposite directions

23 September 2022

The new Chancellor’s “mini Budget” turned out to be more like the full fat version. Admittedly, the tax cuts announced today will give a boost to the economy of roughly 1% over the next year compared to under the previous fiscal plans. That reduces the risk of a protracted recession over the winter.

MPC meeting: Terminal rate of 3.5% likely, but don’t rule out 4%

22 September 2022

A super tight labour market, soaring inflation and a massive fiscal stimulus mean that today’s 50 basis points (bps) hike in interest rates probably won’t be the last large rise. We expect interest rates to peak at 3.5% early next year, but a peak of 4% is also possible.

Freezing energy prices probably won’t avoid a recession

22 September 2022

It’s official: Prime Minister Liz Truss has announced that the average household’s energy bill will be frozen at £2,500 for two years. This will significantly reduce inflation in the short-term and, rather than peaking at 15% in January, inflation will rise to around 11% in October and fall back much more quickly next year.

Monetary Policy Committee preview: Another 50bps rise to come

21 September 2022

A stubbornly tight labour market, soaring inflation and wandering inflation expectations mean the Monetary Policy Committee will probably opt for another 50bps hike at its next meeting on Thursday, 15 September.

Freezing energy prices probably won't avoid a recession

08 September 2022

It’s official: Prime Minister Liz Truss has announced that the average household’s energy bill will be frozen at £2,500 for two years. This will significantly reduce inflation in the short-term and, rather than peaking at 15% in January, inflation will rise to around 11% in October and fall back much more quickly next year.

Consumers battening down the hatches

30 August 2022

Consumers are already battening down the hatches against what will almost certainly be an exceptionally tough winter. July saw a drop in borrowing, and a rise in saving.

UK inflation: Higher and higher and…

26 August 2022

It’s official: The energy price cap will rise by 80%. This will push inflation to around 13% in October, but even that won’t be the end of it. The huge surge in wholesale prices means there is likely to be another rise in the energy price cap in January, sending inflation to a peak of 15% – its highest level since 1980.

CPI inflation: Double digit inflation points to another 50bps rise in September

17 August 2022

Inflation hit double digits for the first time since the early 1980s in July – and there is worse to come. Given the huge surge in natural gas prices over the last month, expect inflation to reach at least 13% in October.

Labour market: Pay growth jump signals second hike

17 August 2022

The labour market remains very tight. June’s figures show that regular pay growth leapt to 4.7%, and employment growth was 160,000.

UK GDP: Not the start of the recession…yet

12 August 2022

The UK economy showed more resilience than expected in June. Yes, GDP contracted by 0.6% month-on-month (m/m) in June, meaning that output dropped by 0.1% on the quarter. But much of this can be explained by the extra bank holiday in June and fewer coronavirus vaccinations. The UK’s real economy held up reasonably well.

MPC Meeting: First, and last, 50bps rise

05 August 2022

The Bank of England’s first 50 basis points (bps) rise in almost 30 years will also be its last of that magnitude. With a recession equivalent to that of the 1990’s now looking inevitable, the Monetary Policy Committee (MPC) is likely to conclude that further large rises are likely to do more harm than good.

Monetary Policy Committee preview: MPC ready to ‘act forcefully’

29 July 2022

The Monetary Policy Committee seems set to give us the biggest rise in interest rates since 1995. It looks like the latest data showing a robust labour market and soaring inflation will be enough for the MPC to make good on its promise to ‘act forcefully’ in response to more persistent inflation.

Consumers reduce saving to prop up spending

29 July 2022

Consumer behaviour in June points to more borrowing and less saving. Borrowing jumped while savings dropped sharply, an indication as to how consumers are protecting their lifestyles from the surge in inflation.

Composite PMI: Early signs of easing inflation

22 July 2022

Time to buckle up, because economic growth is in for a bumpy ride over the next year or so. The small fall in the S&P/CIPS Composite PMI to 52.8 suggests that the economy didn’t start Q3 with a bang, but it isn’t signalling a recession either. More encouraging were the drops in both in input and output prices balances, which hint that inflation pressure may be starting to ease.

CPI Inflation: Broad-based rise in inflation points to a 50bps hike in August

20 July 2022

Another above-expectations rise in inflation to 9.4% means prices are still rising at the fastest rate in more than 40 years. Pressure is now on the Monetary Policy Committee to raise interest rates by a more aggressive 50 basis points (bps) at its next meeting in August – especially as there is plenty of evidence that inflation is becoming more broad-based. We can expect interest rates to reach 2.25% by the end of the year.

Labour market: Big jump in employment makes a rate hike more

19 July 2022

The huge jump in the number of people employed in the three months to May, combined with the tick up in underlying wage growth, significantly raises the chances of the Monetary Policy Committee (MPC) hiking up rates in August.

UK GDP: Economy stronger than expected

13 July 2022

The economy looks stronger today than it did just yesterday, thanks to a 0.5% month-on-month (m/m) rise in GDP in May and upward revisions to the figures for March and April.

New Chancellor suggests looser fiscal policy

07 July 2022

The replacement of Rishi Sunak as Chancellor of the Exchequer with Nadhim Zahawi probably means fiscal policy will be looser for the rest of this year than we previously thought. However, the new Chancellor will have to be careful that any extra spending or tax cuts don’t feed inflation and prompt the Bank of England (BoE) to raise rates by more, cancelling out any positive benefit to the economy.

Borrowing rises as consumers grapple with inflation

01 July 2022

The rise in borrowing in May suggests that consumers are borrowing more and saving less to protect their lifestyles from the surge in inflation. However, the rise in borrowing was only small, suggesting that households are cautious about taking on extra debt. As a result, we still expect GDP to shrink by 0.5% q/q in Q2.

UK GDP: Q1 strength won’t last

30 June 2022

The economy is not experiencing a post-pandemic growth spurt, to put it mildly. The GDP rise of 0.8% quarter-over-quarter (q/q) in the first quarter will almost certainly be followed by a contraction in the second, potentially of 0.5% q/q.

Composite PMI: Growth slowing, not collapsing

23 June 2022

Time to buckle up, because economic growth is in for a bumpy ride over the next year or so. The stabilisation in the S&P/CIPS Composite PMI at 53.1 suggests that the economy probably didn’t contract again in June, but it doesn’t imply much of an improvement either.

CPI inflation rising at fastest rate in 40 years: Even worse to come

22 June 2022

The tick up in inflation to 9.1% means prices are rising at their fastest rate in more than 40 years. This will pile pressure on the Monetary Policy Committee (MPC) to raise interest rates by a more aggressive 50 basis points (bps) at its August meeting. We expect interest rates to reach 2% by the end of the year.

MPC Meeting: Slowly does it, but hints of bigger rises to come

16 June 2022

Interest rates are now at their highest level since the global financial crisis of 2008. The Bank of England has lifted interest rates by 25 basis points (bps), marking the fifth consecutive hike and taking interest rates to 1.25%. We still expect another three hikes of 25bp this year, which would send interest rates to 2%.

UK GDP: Slump in GDP not as bad as it looks

14 June 2022

The risk of a recession later this year has just increased. The 0.3% m/m slump in GDP in April pretty much guarantees that GDP will shrink in Q2, perhaps by as much as 0.4%. However, April’s GDP data is not as bad as it looks.

Labour market: Early signs of stabilisation

14 June 2022

The tick up in the unemployment rate and slowdown in total weekly earnings could be the first signs that the weakening economy is starting to feed through into a softer labour market.

Borrowing rises as consumers grapple with inflation

01 June 2022

The latest money and credit figures suggest that consumers are increasingly borrowing more to protect their lifestyles from the surge in inflation.

UK Economics Update: Spending boost lowers chance of recession

31 May 2022

The risk of a UK recession shrank today after the Chancellor announced extra fiscal spending that will also boost GDP growth by around 0.2%.

Slump in PMI raises recession risk

26 May 2022

There are signs that the economy contracted in May. The S&P/CIPS Composite PMI has slumped 6.4 points to a 15-month low of 51.8. Indeed, the drop was the index’s fourth largest on record and was almost entirely driven by a dive in the output index.

CPI inflation rising at fastest rate in 40 years: Even worse to come

18 May 2022

The jump in inflation to 9% means prices are rising at their fastest rate in more than 40 years. This will pile pressure on the Monetary Policy Committee (MPC) to raise interest rates again at its next meeting on 16 June.

June rate hike on the cards after pay growth soars

17 May 2022

The Monetary Policy Committee (MPC) may have the justification it needs to raise rates again at its next meeting on 16 June.

UK GDP: March drop will make MPC pause for thought

12 May 2022

The economy lost even more momentum over the last few months than we expected. The slowdown is thanks to a 0.1% m/m drop in GDP in March, combined with the downward revisions to growth in January and February.

MPC Meeting: Ofgem to gift UK a recession for Christmas

09 May 2022

The Monetary Policy Committee (MPC) still desires to bring about price stability, and so has raised interest rates from 0.75% to 1%. This marks the first time the MPC has raised rates at four consecutive meetings, and rates are now at their highest level since the financial crisis.

Monetary Policy Committee preview: More rate hikes on the way

05 May 2022

At the Monetary Policy Committee’s (MPC) next meeting on 5 May, we’re expecting a unanimous vote to raise interest rates from 0.75% to 1.00% and for the committee to announce that it will start selling bonds.

First signs of economic impact of war in Ukraine and the cost of living crisis

25 April 2022

The sharp drop in the S&P/CIPS Composite PMI suggests the impact of the war in Ukraine is starting to take a heavy toll on business confidence in the UK, although it isn’t pointing to a collapse in output yet.

UK to narrowly avoid recession

21 April 2022

Despite the huge drop in real incomes this year, we think the UK will narrowly avoid recession due to the strength of household balance sheets, a tight labour market and the timing of the peaks in inflation and bank holidays this year.

CPI inflation rising at fastest rate in 30 years: Even more to come

13 April 2022

Prices are rising at the fastest rate in more than thirty years. The jump in inflation to 7% will pile pressure on the Monetary Policy Committee (MPC) to raise interest rates again at its next meeting on 5 May – and that won’t be the end of it.

Stronger pay growth makes May rate hike more likely

12 April 2022

The Monetary Policy Committee (MPC) may have all the justification it needs to raise rates again at its next meeting on 5 May. The drop in the unemployment rate to 3.8% in February and the rise in pay growth to 5.4% suggests the labour market is continuing to tighten and, combined with soaring inflation, this could strengthen the MPC’s case for interest rate rises.

Economy bounces back from omicron, but recession risk growing

11 April 2022

The cost-of-living crisis and supply chain disruption mean GDP growth is set to slow sharply, despite the 0.1% m/m rise in February that suggests first-quarter growth is set to come in at around 1% q/q.

Cost of living crisis likely to last until second half of 2023

08 April 2022

This year is likely to be remembered for the sharpest drop in household incomes on record, thanks to a dramatic surge in inflation. Household incomes might not start rising again until the second half of 2023, when inflation drops back. We may not see a return to current levels until 2024.

RSM UK supply chain index: War in Ukraine will reverse improvements

06 April 2022

The RSM UK supply chain index has rebounded over the last few months suggesting that events in Ukraine have not started to materially impact UK supply chains yet. However, the war in Ukraine and coronavirus-related lockdowns in China mean supply chains are likely to come under renewed stress over the rest of this year, before they have even recovered from the pandemic.

Lower household saving to support economy

31 March 2022

Despite appearances of good health, GDP growth will weaken shortly and will not regain its strength before the end of the year. We expect GDP growth of just 3.5% in 2022 – that’s less than half of the 7.4% rise we enjoyed in 2021.

Borrowing to rise as consumers grapple with surging inflation

29 March 2022

The latest money and credit figures suggest that consumers are increasingly borrowing more to protect their lifestyles from the surge in inflation. We expect to see higher borrowing and lower saving rates over the rest of the year as the cost-of-living crisis starts to bite.

Spring Statement: Chancellor opens his wallet – but not much

23 March 2022

Nine billion may look like a big number, but sometimes looks are deceiving. The £9bn in extra support announced by the Chancellor this afternoon will go only a little way to easing the burden on households over the rest of this year. That’s because we’re still expecting inflation to peak at more than 8%, and to be above 6% at the end of the year.

CPI inflation rising at fastest rate in 30 years: Much more to come

23 March 2022

British inflation is now at a 30-year high. Another surge in goods inflation pushed February’s rate to 6.2%, and it hasn’t been this far above the Bank of England’s 2% target since the target was introduced in 1992.

MPC hikes rates but takes a more dovish tone

17 March 2022

The Monetary Policy Committee (MPC) still desires to bring about price stability, and so has raised interest rates from 0.50% to 0.75%. Rates are now at their post-pandemic high.

Conflict in Russia won't deter MPC from hiking

14 March 2022

At the Monetary Policy Committee’s next meeting on 17 March, we’re expecting a unanimous vote to raise interest rates from 0.50% to 0.75%. But given how uncertain the outlook for the economy and inflation is currently, we expect the MPC to signal that its next moves will be entirely dependent on the incoming data.

GDP bounce back will be short lived

11 March 2022

January’s much better-than-expected 0.8% m/m jump in GDP growth means the economy has reversed all the damage done by omicron in December and then some!

Sanctions on Russia mean lower GDP growth and higher inflation for the UK

08 March 2022

The result of the war and economic sanctions on Russia is that UK inflation will probably surpass 8% in April, and remain above 5% by the end of the year, while GDP growth will be just 3.5%. What’s more, those parts of the UK and global economies that have not yet come out of the pandemic’s supply shocks will soon experience further setbacks.

PMI suggests economy largely shrugged off omicron

21 February 2022

The economy looks like it may have suffered a little from omicron in December and January, but a strong rise in the IHS/Markit Composite PMI from 55.3 in January to 60.2 in February suggests that it may be on the mend.

MPC on track for two more rate hikes this year

16 February 2022

British inflation is now at a 30-year high after another surge in goods inflation pushed January’s rate to 5.5%. Inflation hasn’t been this far above the Bank of England’s 2% target since the target was introduced in 1992.

Tighter labour market makes February rate hike more likely

15 February 2022

The drop in employment in December won’t be enough to prevent the Monetary Policy Committee (MPC) raising interest rates again at its next meeting in March. In fact, the rise in wage growth will fuel the MPC’s concerns about a tight labour market – keeping wage growth above the level it feels is consistent with its inflation target, which makes a rate hike in March more likely.

Energy Shock: A Russia-Ukraine conflict would make cost of living crisis worst on record

15 February 2022

If Russia invades Ukraine, the resulting surge in energy prices could push inflation above 8%, cause the deepest fall in households’ real disposable incomes on record, and knock 1% off GDP in 2022.

Cost of living crunch will be worse than omicron

11 February 2022

The ONS’s announcement today that the UK was the fastest growing G7 member in 2021 may have left you wondering if there’s a ‘but’ coming. At the risk of spoiling the ending, it is.

GDP growth suggests England will have to wait until next year for victory

04 February 2022

There is a surprisingly good relationship between a country’s results in the Six Nations rugby tournament and GDP growth in the prior year. Our forecasts for GDP growth in 2022 suggest England may romp back to a winning position next year.

More interest rate hikes to come

03 February 2022

As expected, the Monetary Policy Committee (MPC) doubled down on its desire to show that it is serious about price stability by raising interest rates from 0.25% to 0.50% on Thursday. We may expect two further rate hikes this year, probably in both March and May, with interest rates finishing the year at 1.0%.

Borrowing to rise as consumers grapple with surging inflation

01 February 2022

Surging inflation is forcing consumers to borrow more and save less, suggest the latest money and credit figures.

MPC will raise rates and shrink balance sheet to control inflation

28 January 2022

We’re expecting that the Monetary Policy Committee (MPC) will vote unanimously to raise interest rates at its next meeting on 3 February. Along with lifting interest rates from 0.25% to 0.50%, the MPC may also stop reinvesting the proceeds from maturing gilts and allow its balance sheet to shrink gradually over the next few years. Our forecast is that another rate rise in autumn will send interest rates to 0.75% by the end of the year.

PMI suggests economy largely shrugged off omicron

24 January 2022

The tick-down in the IHS/Markit Composite PMI from 53.6 in December to 53.3 in January suggests the economic damage from omicron has been limited. Indeed, the PMI suggests growth probably stabilised in January after falling in December. We expect most of the output lost in December to be made up in February as the number of people self-isolating drops, workers return to offices and consumers get back to socialising in person.

RSM UK supply chain index: the worst has passed, but choppy waters remain

20 January 2022

After plummeting to a two-decade low in November, the RSM UK supply chain index showed some improvement in December. However, labour shortages are still a problem, and factory and port closures in China could reignite supply chain stress.

Inflation surge far from over

19 January 2022

British inflation is now at a 30-year high after the surprise strength of goods inflation pushed December’s rate to 5.4%. Inflation hasn’t been this far above the Bank of England’s 2% target since the target was introduced in 1992.

Tighter labour market makes February rate hike more likely

18 January 2022

November’s strong labour market figures mean it’s more likely that the Monetary Policy Committee (MPC) will raise interest rates again at its next meeting on 3 February.

GDP recovery may be short lived

14 January 2022

The jump in monthly GDP growth, to 0.9% month-on-month in November, takes GDP above its pre-pandemic level. However, the emergence of the omicron variant means that it probably fell by around 0.5% m/m in December and this would leave Q4 GDP growth at 1%.

Timely data suggests Omicron hit manageable

07 January 2022

The latest experimental near real-time data from the ONS suggests that the economy won’t be hit as hard by the Omicron variant as was feared.

Early Christmas spending boosts credit, but expect a New Year drop

04 January 2022

The latest money and credit figures suggest that consumer spending in November was reasonably strong, but increased consumer caution in December due to the Omicron variant probably caused spending to drop last month.

MPC initiates lift off despite omicron concerns

16 December 2021

The Bank of England is the first major central bank to raise interest rates after the pandemic. By an 8-1 vote on Thursday, the Monetary Policy Committee (MPC) raised the base interest rate by 0.15 percentage points to 0.25%. but maintained its bond buying target at £895bn. However, the market’s pricing in of a further three rate hikes by the end of 2022 looks premature to us.

PMI suggests economy dipped in December

16 December 2021

Omicron hit the services sector in early December, going by the sharp fall in the IHS/Markit Composite PMI from 57.6 to 53.2. At the forefront of the Monetary Policy Committee’s (MPC) thinking when it meets later today will be how the latest restrictions and the threat of another lockdown will affect the economy. We think the MPC will find the uncertainty enough to delay the first interest rate hike until February.

Still more inflation to come

15 December 2021

The economic uncertainty created by the omicron variant may be enough to prevent the Monetary Policy Committee (MPC) from hiking interest rates on Thursday, but high inflation and a tight labour market mean it’s unlikely to delay tightening for long.

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2022 UK year ahead: Moving towards a post-pandemic economy

02 December 2021

RSM UK economist, Tom Pugh, predicts 2022 will see a transition towards a hypercompetitive post-pandemic economy.

Consumer spending recovery under threat

01 December 2021

RSM UK's economist Tom Pugh, looks at the strength of October’s consumer borrowing, adding to evidence that households were a bit more willing to go out and spend last month. However, this could just be down to earlier Christmas shopping, so spending may weaken in December.

Introducing the RSM UK Supply Chain Index: Sustained growth depends on investment

24 November 2021

Introducing the RSM UK Supply Chain Index: Sustained growth depends on investment. Which provides a near real-time and forward look at the elements of transportation, manufacturing, sales and labour that underscore the manufacturing and service sectors.

PMI suggests economy can withstand rate hike

23 November 2021

Economic growth was stable in November, going by the tick down in the IHS/Markit Composite PMI from 57.8 in October to 57.5. At the same time, the jump in the input prices balance from 79.8 to 81.9 suggests that cost pressures continued to rise in November. The steady PMI should be enough to convince the Monetary Policy Committee (MPC) that the economy can withstand a rate hike in December.

Another step on the ladder to 5%

17 November 2021

The jump in inflation in October to 4.2%, its highest rate since 2011, was probably a bit higher than the Monetary Policy Committee envisioned a few weeks ago. Combined with yesterday’s robust labour market data, we think the possibility of a rate hike in December has increased.

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Unscathed labour market suggests December rate hike

16 November 2021

The labour market appears to have escaped the end of the furlough scheme relatively unharmed. If the official data for October tells a similar story, and we think it will, it means the Monetary Policy Committee (MPC) is now more likely to raise interest rates in December.

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GDP rise keeps December rate hike alive

11 November 2021

GDP’s strong showing in September meant it rose by 1.3% quarter-on-quarter in Q3. That’s a little below the Bank of England’s forecast for the third quarter, but keeps the Monetary Policy Committee (MPC) on track to raise rates from 0.1% to 0.25% in December.

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Carbon pricing should play a key role in decarbonisation

08 November 2021

Solutions that harness the power of markets, like cap and trade systems, will play a crucial role in helping the world to decarbonise, while ensuring minimum increases in costs to businesses and consumers. Along with regulation and new carbon taxes, these systems should be at the heart of policy discussions as the world moves toward net zero.

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Shipping disruptions to last well into 2022

08 November 2021

Fragile global supply chains are under further pressure from the delta variant of coronavirus. As it spreads, it results in more port closures, factory shutdowns, production halts and labour shortages.

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Talk like a hawk, walk like a dove

05 November 2021

The Monetary Policy Committee has voted to leave the UK’s interest rate at its record low of 0.1%, but has also been clear that it will hike rates in December if it needs to. Tom Pugh takes a closer look at the MPC’s decision and likely next steps.

No sign of boom in consumer spending

29 October 2021

The latest money and credit figures suggest that consumer spending was subdued in September. Credit growth was still well below its pre-crisis average and, given retail sales volumes fell in September, the small rise in borrowing won’t be enough ease mounting concerns that the economic recovery is running out of steam. This means that rates may not rise as far or as fast as the market expects, even if the Monetary Policy Committee (MPC) does hike them later this year.

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Saving some powder for a pre-election giveaway

27 October 2021

This was a bigger Budget than expected, with government spending set to rise by £150bn over the course of this parliament. But the Chancellor still chose to keep back some of the boost in revenues provided by the Office for Budget Responsibility’s (OBR) upgraded economic forecasts. This gives him some tax-cutting ammunition to use before the next general election.

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Minimum wage rise will offset hit from inflation, but not much else

27 October 2021

The upcoming rise in the national living wage will put some further upward pressure on firms’ costs over the next year and, combined with labour shortages, could feed into concerns about rapid wage growth pushing up inflation.

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Economy picked up some momentum in October

22 October 2021

The unexpected rise in the IHS/Markit Composite PMI from54.9 in September to 56.8 in October is welcome news and suggests that the economy has picked up momentum after what looks like a tough September.

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A pause on the way to 5%

20 October 2021

Inflation paused for breath in September, slipping to 3.1% from 3.2% in August, but this won’t last long. Surging energy prices and supply-chain disruptions will push inflation to a peak of close to 5.0% by April 2022, then it will fall just as quickly over the rest of 2022 as base effects fall out of the annual comparison.

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Businesses start shifting higher energy costs to consumers

14 October 2021

The surge in energy prices will ensure that real disposable incomes fall next year. Businesses could feel the pain more acutely than individual consumers, as they aren’t protected by a price cap and that will cause them to raise prices or even curtail production.

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Rebound in growth unlikely to be sustained

13 October 2021

The rebound in monthly GDP growth in August after the dismal contraction in July, leaves the economy 0.8% below its pre-pandemic level. The smaller hole in the economy increases the risk that the Monetary Policy Committee (MPC) will raise interest rates later this year. Read on to find out our outlook on the economy.

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Labour market tightening but biggest test yet to come

12 October 2021

The remarkable labour market recovery continued in August, which will embolden the hawks on the Monetary Policy Committee (MPC). The real question now is how the labour market handled the end of the furlough scheme in September.

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Lower carbon emissions won't mean slower economic growth

11 October 2021


The growing focus on a business’s carbon emissions by customers, financiers and regulators will impact competitiveness in a much greater way than before. The middle market should prepare itself for the transition to a less carbon intensive economy.

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Weakening recovery suggests MPC will need to tread lightly

05 October 2021

The stability in the composite activity PMI in September indicates that GDP growth was pretty flat last month, and there was more evidence that firms are starting to raise prices in response to the ongoing cost pressures.

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Excess savings – It’s a rich man’s world

01 October 2021

Households saved around £44bn in the second quarter of the year but these numbers can be deceiving. Read on to find out why we're concerned about the cost of living.

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Economic outlook weakening

30 September 2021

Despite the improved pace of economic activity in Q2, we anticipate that the cumulative effect of supply chain constraints, rising prices and the lingering challenges of the pandemic will dampen that improvement in the current quarter, and weaken overall GDP growth.

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Small rise in borrowing unlikely to boost spending

29 September 2021

The latest credit data provide some encouragement that consumer spending picked up in August, but growth was still well below its pre-crisis average.

Don’t panic! Fuel shortages not a threat to the economy, yet

28 September 2021

Fuel shortages may be yet another factor dragging on economic growth if they continue into next week.

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MPC signals rate hikes are coming closer

23 September 2021

The MPC took a more hawkish tone in its policy statement and suggested that the case for tightening policy had gotten a bit stronger recently.

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MPC to focus on economy risk as energy prices surge

22 September 2021

Rising energy prices will weigh on consumer spending and GDP growth next year. The Monetary Policy Committee (MPC) should be more concerned about the negative impact on the economic recovery from soaring energy prices than about the upward impact on headline inflation.

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Inflation expectations key to interest rate outlook

21 September 2021

Rising prices prompted a small rise in the inflation expectations of UK households in August, according to the latest figures. Even so, there’s little sign of the spike in medium-term expectations that would make the Monetary Policy Committee (MPC) concerned that the recent lift off in inflation is becoming entrenched.

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Labour shortages: Where are all the workers?

16 September 2021

If labour shortages start to push up pay growth more widely and inflation expectations start to rise, then the MPC may act to tighten monetary policy in the first half of next year before the economy has properly recovered from the crisis.

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Halfway up the inflation mountain

15 September 2021

The leap in inflation to 3.2% in August is only the start of a trend that should take it beyond 4.0%. But it should drop back rapidly next year.

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Dip in GDP growth is a blip not a trend

10 September 2021

The recovery in GDP stalled in July but should pick up in August. That said, labour and product shortages mean the risks are clearly to the downside.

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RSM Financial Conditions Index: Gimme shelter

03 September 2021

As a result of financial stability, the RSM UK Financial Conditions Index has moved to its highest level since 2014, reaching 1.1 standard deviations above levels of risk that are normally priced into financial assets.

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Jump in pay growth won’t concern the MPC

24 August 2021

At first glance, the surge in headline pay growth to 8.8 per cent 3myy in June is another reason for the Bank of England to start raising interest rates in mid-2022, but headline pay has been inflated by base and compositional effects.

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Inflation dips in July but will still surpass 4 per cent

24 August 2021

The larger-than-expected drop in CPI inflation, from 2.5 per cent in June to 2 per cent in July is only a temporary pause before CPI inflation surges to above 4 per cent by the end of the year.

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