Chief Economist, Heteronomics

Phil Rush

Chief Economist

Heteronomics

Heteronomics represents a different kind of economics. We believe analysis should delve into the details of what is really going on, rather than using overly simplistic assumptions to quick-sell stories. Independence from myopic institutional pressures allows us to focus on the realities underlying your asset allocation decisions, without the conflicts of the old market structures. Heteronomics targets the themes driving UK asset prices, offering the benefits of depth, independence and ultimately price.

UK-centric macro research

Macroeconomics

<ul>
<li>UK retail sales exceeded expectations again with a 1.2% m-o-m surge in October. It was driven by an extension of recent trends. Specifically, the rotation towards consumption both from and for the home environment ahead of another lockdown within it.</li>
<li>The reliance on consumer goods over services remains negative for overall GDP, which is set to be smashed again by restrictions this winter. Divergence within the sector has also increased with the broad experience recessionary while a small set surge.</li>
</ul>


UK retail sales exceeded expectations again with a 1.2% m-o-m surge in October. It was driven by an extension of recent trends. Specifically, the rotation towards consumption both from and for the home environment ahead of another lockdown within it.
The reliance on consumer goods over services remains negative for overall GDP, which is set to be smashed again by restrictions this winter. Divergence within the sector has also increased with the broad experience recessionary while a small set surge.


UK: Narrow Retail Rise in Broad Recession

<ul>
<li>UK inflation increased by a tenth more than we expected in October to 0.7% y-o-y on the CPI and 1.3% on the RPI. Upside news in clothing prices is likely to be short-lived owing to the payback relationship into Novembers being the strongest of the year.</li>
<li>The extent of the seasonality around yearend remains a key uncertainty in our forecast profile. A return towards the target should only occur in the Spring amid sizeable base effects, while the inflation outlook is unlikely to threaten the BoE’s easing programme.</li>
</ul>


UK inflation increased by a tenth more than we expected in October to 0.7% y-o-y on the CPI and 1.3% on the RPI. Upside news in clothing prices is likely to be short-lived owing to the payback relationship into Novembers being the strongest of the year.
The extent of the seasonality around yearend remains a key uncertainty in our forecast profile. A return towards the target should only occur in the Spring amid sizeable base effects, while the inflation outlook is unlikely to threaten the BoE’s easing programme.


<ul>
<li>GDP growth continued to slow in September to a mere 1.1% m-o-m. Losing momentum at this rate implies over a quarter of the lockdown hit would fail to be mechanically recovered. A second lockdown in November is set to compound the economic damage.</li>
<li>Mobility metrics have only fallen to August levels as the public appears to be reluctant to stay home this time. However, prohibitions on economic activity mean the hit to output is still set to be large, where I assume a level similar to June.</li>
</ul>


GDP growth continued to slow in September to a mere 1.1% m-o-m. Losing momentum at this rate implies over a quarter of the lockdown hit would fail to be mechanically recovered. A second lockdown in November is set to compound the economic damage.
Mobility metrics have only fallen to August levels as the public appears to be reluctant to stay home this time. However, prohibitions on economic activity mean the hit to output is still set to be large, where I assume a level similar to June.


<ul>
<li>The unemployment rate increased again to 4.76% in Sep-20, which was only 1bp above my forecast. A rise in redundancies to a record high of 314k is driving up the UR amid a stagnant labour market. Vacancies continue to imply that the UR will peak near 7.5%.</li>
<li>Average wages have now extended their recovery back to their pre-Covid trend. That bullish experience is not one that most employees will recognise, though, amid job losses in low paying industries creating a supportive sampling effect.</li>
</ul>


The unemployment rate increased again to 4.76% in Sep-20, which was only 1bp above my forecast. A rise in redundancies to a record high of 314k is driving up the UR amid a stagnant labour market. Vacancies continue to imply that the UR will peak near 7.5%.
Average wages have now extended their recovery back to their pre-Covid trend. That bullish experience is not one that most employees will recognise, though, amid job losses in low paying industries creating a supportive sampling effect.


<ul>
<li>The BoE downgraded its forecasts, as expected, returning to a more conventional policy trade-off in the process. Risk management considerations encouraged the MPC to exceed expectations, which it did by announcing a £150bn increase to the QE target.</li>
<li>This announcement encompasses the next increase I expected for February. It also creates room to maintain a tapered pace from May for three months longer than I expected, to Nov-21. The space to respond to market malfunction may matter more. </li>
</ul>


The BoE downgraded its forecasts, as expected, returning to a more conventional policy trade-off in the process. Risk management considerations encouraged the MPC to exceed expectations, which it did by announcing a £150bn increase to the QE target.
This announcement encompasses the next increase I expected for February. It also creates room to maintain a tapered pace from May for three months longer than I expected, to Nov-21. The space to respond to market malfunction may matter more. 


United Kingdom

SPDR FTSE UK All Share ETF is an open ended, UCITS IV compliant exchange traded fund, domiciled in Ireland. The fund's objective is to track the performance of FTSE All Share Index. The Fund invests in physical securities in the index.

SPDR FTSE UK All Share (FTAL LN)

UK: Narrow Retail Rise in Broad Recession

The rotation towards consumption both from and for the home environment continues and is negative for GDP. Increasingly divergent retailer...

Phil Rush

UK: Price Rises Over-Dressed in Oct-20

The upside in UK inflation from clothing should unwind in Nov. Yearend seasonality remains a key uncertainty in our forecast profile, but the pull...

Phil Rush

UK: Stumbling into a Fall for Winter

UK GDP growth halved again in Sep, implying over 25% of the lockdown hit would fail to be easily recovered. Another lockdown has hit mobility to...

Phil Rush

UK: Record Redundancies in Sep-20

A rise in redundancies to a record high of 314k is driving up the UR while vacancies imply a peak near 7.5%. The recovery in average wages is...

Phil Rush

BoE: QE for Time and Space over Pace

The BoE downgraded its forecasts and exceeded expectations by announcing a £150bn increase to the QE target. In practice, the surprise adds tapered...

Phil Rush