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>The UK government has decided to follow other European states again into a sweeping nationwide lockdown. Such an aggressive response is more severe than I assumed, so I am downgrading my forecast again to contain an even deeper winter recession.</li>
<li>Additional fiscal support is slim but should postpone the bulk of the unemployment rise again. Deficits are also raised through lost revenue. Monetary policy is likely to continue absorbing the issuance and be ready to go into overdrive again if the gilt market breaks.</li>
</ul>


The UK government has decided to follow other European states again into a sweeping nationwide lockdown. Such an aggressive response is more severe than I assumed, so I am downgrading my forecast again to contain an even deeper winter recession.
Additional fiscal support is slim but should postpone the bulk of the unemployment rise again. Deficits are also raised through lost revenue. Monetary policy is likely to continue absorbing the issuance and be ready to go into overdrive again if the gilt market breaks.


<ul>
<li>UK retail sales exceeded expectations as they surged by another 1.5% m-o-m in September. The rotation away from services extended again with goods sales strength broadly consistent with building a healthy home to lockdown inside.</li>
<li>The recovery in GDP has been far weaker and losing momentum. I still expect another slowing in September before tightening restrictions drive it temporarily into reverse over the winter. People movements are demonstrating the danger by already falling.</li>
</ul>


UK retail sales exceeded expectations as they surged by another 1.5% m-o-m in September. The rotation away from services extended again with goods sales strength broadly consistent with building a healthy home to lockdown inside.
The recovery in GDP has been far weaker and losing momentum. I still expect another slowing in September before tightening restrictions drive it temporarily into reverse over the winter. People movements are demonstrating the danger by already falling.


<ul>
<li>Inflation rebounded in September to 0.53% y-o-y on the CPI and 1.13% on the RPI, consistent with the headline Consensus, but disappointing my forecast. Food caused much of the difference, partly because of methodology on the restaurant side.</li>
<li>With more of the August decline now appearing to be VAT-related, my m-o-m forecast for April-20 is revised up, but the annual rate remains broadly lower, especially in the interim. These data are unlikely to affect the MPC’s forthcoming policy easing decision.</li>
</ul>


Inflation rebounded in September to 0.53% y-o-y on the CPI and 1.13% on the RPI, consistent with the headline Consensus, but disappointing my forecast. Food caused much of the difference, partly because of methodology on the restaurant side.
With more of the August decline now appearing to be VAT-related, my m-o-m forecast for April-20 is revised up, but the annual rate remains broadly lower, especially in the interim. These data are unlikely to affect the MPC’s forthcoming policy easing decision.


<ul>
<li>The unemployment rate rose to 4.5% in Aug-20, with the 0.2pp surprise associated with revisions from a methodological change. The underlying rise was slightly smaller than we assumed, but still marked an acceleration consistent with our 4.8% forecast for Q3.</li>
<li>Vacancies are rising but remain consistent with a peak UR between 7% and 8%. Stricter lockdown restrictions than we assume could breach that, though. A normalisation in average wages implies unit cost pressures that offset the disinflationary implications.</li>
</ul>


The unemployment rate rose to 4.5% in Aug-20, with the 0.2pp surprise associated with revisions from a methodological change. The underlying rise was slightly smaller than we assumed, but still marked an acceleration consistent with our 4.8% forecast for Q3.
Vacancies are rising but remain consistent with a peak UR between 7% and 8%. Stricter lockdown restrictions than we assume could breach that, though. A normalisation in average wages implies unit cost pressures that offset the disinflationary implications.


<ul>
<li>GDP growth slowed further in August to only 2.1% m-o-m, which was under half the expected rate. Such sequential slowing reinforces my view that the recovery is staling well before it recovers pre-Covid levels.</li>
<li>The trend towards reimposing restrictions on activity is likely to cause a temporary reversal in the recovery over the winter. A vaccine might be available before Christmas, but it won’t be delivering widespread immunity until months later.</li>
</ul>


GDP growth slowed further in August to only 2.1% m-o-m, which was under half the expected rate. Such sequential slowing reinforces my view that the recovery is staling well before it recovers pre-Covid levels.
The trend towards reimposing restrictions on activity is likely to cause a temporary reversal in the recovery over the winter. A vaccine might be available before Christmas, but it won’t be delivering widespread immunity until months later.


UK: Recovery Stalling Before Winter Winds

United Kingdom

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SPDR FTSE UK All Share (FTAL LN)

UK: Locking Down the Economic Ruins

The UK government has followed other European states into a nationwide lockdown. Such an aggressive response is more severe than I assumed, so I am...

Phil Rush

UK: Retail Surges in Sep Towards a Wall

UK retail sales exceeded expectations as they surged by another 1.5% m-o-m in September. The source of strength might broadly be defined as...

Phil Rush

UK: Inflation Rebound Stunted in Sep-20

UK inflation failed to rise as much as I expected largely because of food prices and methodology. The inflation profile now looks lower, although...

Phil Rush

UK: Unemployment Accelerates in Aug-20

A methodological change drove the 0.2pp surprise. The underlying UR rise was slightly smaller than we assumed, but still marked an acceleration...

Phil Rush

UK: Recovery Stalling Before Winter Winds

GDP growth slowed further in August to only 2.1%, which was under half the expected rate. Such sequential slowing reinforces my view that the...

Phil Rush