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Eco Pulse

United Kingdom: The recession is still ahead

24/03/2023 • By Guillaume DERRIEN

According to the ONS, British GDP recovered by 0.3% m/m in January, after dropping 0.5% m/m in December. Services contributed 0.4 points, thanks in part to a return to normal working levels in January.

Eco Pulse

United Kingdom: Q4 GDP: on a tightrope

24/02/2023 • By Hélène BAUDCHON

Following a 0.5% m/m fall in GDP in December according to the ONS, activity in the UK deteriorated in January before making a strong rebound in February according to the PMI survey, particularly in the service sector. The PMI was 49.2 for the manufacturing sector and 53.3 for services. Among the bad news, company insolvencies (up 59% y/y in 2022) reached their highest level since 2009.

Eco Pulse

United Kingdom: Further contraction in GDP on the horizon
27/01/2023 • By Félix BERTE

According to the latest business surveys, economic activity in the UK continues to contract. According to the Confederation of British Industry (CBI), confidence balances in the industrial and distributive trades sectors (retail and wholesale sales) are clearly deteriorating while rebounding slightly in the services sector

Eco Emerging

Türkiye: Fragile financial stabilisation
17/01/2023 • By François FAURE

Türkiye has enjoyed a period of financial calm since mid-2022 with exchange rate stability relative to the first half of the year, lower risk premiums and bond yields. Growth stagnated in Q3 2022, but monthly inflation slowed and the economic indicators available for Q4 2022 continued to be positive. For 2023, a slowdown is inevitable given the weaker levels of activity expected from the country’s main trading partners [...]

Eco Week

United Kingdom: Peak inflation?
18/12/2022 • By Félix BERTE

UK inflation finally fell in November to +10.7% y/y (+0.4% m/m), compared with +11.1% in October (+2% m/m). Other good news is that core inflation is also falling, for the first time since September 2021 (-0.2 points, i.e. 6.3% y/y). In the face of still very high inflation, however, the Bank of England (BoE) Monetary Policy Committee (MPC) decided to raise its key rate further by 50 basis points, thus bringing it to 3.5% [...]

Eco Perspectives

United Kingdom: recession
15/12/2022 • By Félix BERTE

UK growth contracted sharply in Q3, confirming that the economy has gone into recession. Household and business surveys confirm this fall in consumption and investment, which is likely to continue in the coming months. Faced with persistent inflation which continues to spread, the Bank of England is continuing to tighten its monetary policy, despite the economy entering recession [...]

Charts of the Week

Turkey: consumption on credit
08/12/2022 • By François FAURE

In Turkey, growth has held up well (+4% year-on-year in Q3 2022) despite the rise in inflation. Consumer spending was the main supporting element, with an increase of 18%. However, the acceleration in inflation (from 19% year-on-year in Q3 2021 to 74% in Q2 2022) led to a contraction in the wage bill in real terms up to Q2 2022, despite a strong recovery in employment. Since mid-2022, inflation has continued to accelerate (+84 [...]

Eco Flash

UK: Foreign trade declines due to Brexit
30/11/2022 • By Félix BERTE

The United Kingdom’s exit from the European single market and the customs union on 31 January 2020 caused a significant economic shock which has had an adverse impact on growth and inflation in the UK, particularly on foreign trade. Since 1st January 2021 and the coming into effect of the post-Brexit Trade and Cooperation Agreement (TCA), bilateral trade in goods between the United Kingdom and the European Union has fallen sharply [...]

Eco Week

United Kingdom: Entering recession
20/11/2022 • By Félix BERTE

According to the preliminary estimate by the Office for National Statistics (ONS), quarterly growth in UK GDP fell by 0.2% (q/q) in Q3 (compared with +0.7% in Q1 and +0.2% in Q2). This contraction is mainly due to higher-than-expected destocking, particularly in the manufacturing and retail sectors.

Eco Week

Resignations and inflation
23/10/2022 • By Félix BERTE

Inflation jumped sharply in September, moving into the symbolic territory of double digits (10.1% y/y), slightly above expectations (10%). The rise in inflation is expected to continue as it is widespread in the economy. Furthermore, core inflation rose significantly in September (+0.5 points) to 7.5% y/y. Nevertheless, inflation continues to weigh on economic activity.

EcoTV Week

United Kingdom: “God save the Gilt”
07/10/2022 • By Félix BERTE

Gilt yields surged right along the yield curve, increasing downward pressures on the pound sterling.
Eco Week

The ‘dash for cash’, leverage and the need for economic policy coordination
02/10/2022 • By William DE VIJLDER

Financial markets in the UK have recently been confronted with a ‘dash for cash’, whereby investors sell off even safe assets such as long-term government bonds to obtain cash. The catalyst was the announcement of an expansionary fiscal policy, which might force the Bank of England to hike interest rates more aggressively given the potential inflationary consequences. Leverage and the ensuing margin calls acted as an accelerator of the jump in Gilt yields [...]

Eco Perspectives

Essential budgetary support
29/09/2022 • By Félix BERTE

UK growth contracted slightly in Q2, but the economy should not enter a recession before Q4. On the one hand, the labour market continues to operate at full employment, which will partially absorb the sharp impact of inflation on purchasing power. On the other hand, the new government plan to support households and businesses should mitigate future energy price increases [...]

Eco Perspectives

The Swiss franc: an unwavering shield against inflation
29/09/2022 •

Switzerland differs from other European countries in that it has significantly lower inflationary pressures, protected as it is by its strong currency and by resilient business activity which should continue to grow for the rest of 2022 and during 2023. Although the Swiss National Bank (SNB) is likely to argue that 3 [...]

Eco Week

A tighter but less efficient labour market than before Covid
25/09/2022 • By Félix BERTE

Despite a tight labour market, the UK economy is showing clear signs of a slowdown in growth as inflation hits a 40-year high. According to the monthly GDP estimate published by the ONS, on a three-month moving average UK growth was flat in July, marginally below expectations (+0.1%). This zero figure masks more substantial monthly changes: after rising in May (+0.4% m/m), GDP fell in June (-0.6% m/m) before recovering slightly in July (+0.2% m/m). In July, growth in the services sector (+0 [...]

EcoTV Week

Turkey: on the razor's edge
22/07/2022 • By François FAURE

Turkey's economic situation continues to offer a stark contrast, with resilient growth on one hand and soaring inflation, dwindling foreign exchange reserves and a depreciating lira on the other. In short, the reed bends but does not break. Some explanations in this new issue of Eco TV Week.
Eco Week

An unexpected return to growth
17/07/2022 • By Félix BERTE

The three-month moving average growth for the UK was 0.4% in May (3.5% y/y), above the expectations (0%). The Office for National Statistics (ONS) provides a detailed analysis of monthly changes in economic activity. After contractions in March and April, GDP returned to growth in May (+0.5% m/m). This growth was driven by the three main sectors: services , production and construction.

Eco Emerging

On the razor’s edge
08/07/2022 • By François FAURE

The economic situation in Turkey offers striking contrasts between (i) sustained growth until Q1 2022 and stubbornly huge inflation, (ii) much greater confidence among companies than among households, (iii) a primary budget surplus and a deteriorating current account deficit due to the surge in the price of energy, and (iv) domestic borrowing conditions for the State at an unprecedented negative real rate despite massive outflows from portfolio investments [...]

Eco Perspectives

Heading toward recession?

29/06/2022 • By Félix BERTE

Inflation continues, driven by factors specific to the UK economy. On the one side, we have a labour market with full employment, favouring wage rises. On the other side, we find the UK economy’s exposure to the consequences of the invasion of Ukraine putting considerable pressure on energy prices. Despite increasing its policy rate early, and then building on this with a succession of further hikes, the Bank of England is struggling to control rising prices [...]

Eco Perspectives

To address inflation, a coordinated tightening of the policy mix
29/06/2022 •

After being severely hit by the Omicron variant, economic activity picked up again as of February, and the recovery is expected to continue with growth reaching 4% in 2022. Through no fault of its own, Norway is one of the big winners of the Russia-Ukraine conflict thanks to a substantial increase in oil and gas revenues, which are expected to reach NOK 1,500 bn in 2022 (about EUR 143 bn) [...]

Eco Week

Package to support purchasing power runs up against climate commitments
19/06/2022 • By Félix BERTE

Unsurprisingly, the 16 June meeting of the Bank of England’s Monetary Policy Committee (MPC) led to a further increase in its policy rate, the fifth consecutive 25 basis point increase, taking it to 1.25%. This tightening of monetary policy, relatively modest when compared to the Fed’s 75bp hike, aims to control inflation, which is continuing to rise steeply (2 [...]

Eco Week

Weak growth and recession risk
15/05/2022 • By Félix BERTE

The UK economy grew 0.8% q/q in Q1 2022, taking GDP 0.7% above its pre-Covid level of Q4 2019 but falling short of the 1% expansion expected. Since the ONS also publishes monthly GDP figures, it is possible to see how the economy fared over the course of the quarter. After a positive January (+0.7% m/m), output was flat in February (growth of 0% m/m as opposed to the initial estimate of +0.1%), and GDP even contracted slightly in March (-0.1% m/m) [...]

Charts of the Week

Higher inflation causes decline in real wages

26/04/2022 • By Félix BERTE

Faced with multiple pressures on prices, the United Kingdom has seen a sharp increase in inflation; CPIH hit 6.2% in March[1]. For households, this acceleration has resulted in a considerable deterioration in purchasing power. In real terms – that is, inflation-adjusted – the trend in wages was clearly negative (-1%) year-on-year in February 2022. However, bonus payments have offset this reduction, with wages including bonuses rising slightly (0.4%) [...]

Eco Emerging

Serbia: Temporary headwinds
21/04/2022 • By Pascal DEVAUX

The impact on Serbia’s economy caused by the war in Ukraine is likely to remain moderate. However, the war will adversely affect all macroeconomic indicators. Growth forecasts have been downgraded because of sharply higher inflation, trade exposure to Russia and a weaker European economy. Serbia’s central bank has carried out only moderate monetary tightening so far, expecting that the jump in inflation will be short-lived [...]

Eco Week

The Bank of England faces rising inflation

18/04/2022 • By Félix BERTE

Economic growth strengthened over the first two months of 2022, but is likely to slow in the near future due to inflationary pressures. Industrial production rose 3.6% year-on-year (y/y) in February, suggesting that economic activity picked up in Q1 2022 (provided that this rise continued into March) relative to Q4 2021. In services, the business climate has improved continuously since Q3 2021, taking the PMI to 62.6 in February 2022 [...]