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>April’s surprise surge in retail sales was revised away, and yet May contracted for the ninth time in the past year. Hawkish hopes of retail resilience were built on sand.</li>
<li>High inflation is squeezing real incomes and consumption volumes as a natural progression of the pressures burning themselves out without hyperactive tightening.</li>
<li>Overdoing rate hikes risks recession, but the housing market canary seems alive and well. Less depressed supply is finding demand, consistent with house prices not falling.</li>
</ul>


April’s surprise surge in retail sales was revised away, and yet May contracted for the ninth time in the past year. Hawkish hopes of retail resilience were built on sand.
High inflation is squeezing real incomes and consumption volumes as a natural progression of the pressures burning themselves out without hyperactive tightening.
Overdoing rate hikes risks recession, but the housing market canary seems alive and well. Less depressed supply is finding demand, consistent with house prices not falling.


<ul>
<li>A shock spike in the UK unemployment rate broke its resilient trend. Less depressed labour force levels matter less than data about price-relevant gaps, like the UR.</li>
<li>The UR rise appears to be a genuine shift, despite the high demand for workers helping to drive higher wages. The wage trend appears comfortably above 4%.</li>
<li>The peak cyclical pressure in the UK labour market may have passed, with the UR trend turning and wage growth not rising as much. A burn-out phase may be starting.</li>
</ul>


A shock spike in the UK unemployment rate broke its resilient trend. Less depressed labour force levels matter less than data about price-relevant gaps, like the UR.
The UR rise appears to be a genuine shift, despite the high demand for workers helping to drive higher wages. The wage trend appears comfortably above 4%.
The peak cyclical pressure in the UK labour market may have passed, with the UR trend turning and wage growth not rising as much. A burn-out phase may be starting.


<ul>
<li>UK GDP declined again in April, meaning output has only grown in one of the past five months. High consumption around Easter and recovering car trade were overwhelmed.</li>
<li>Health output crashed as covid-related trade ended, professional services fell from their highs, and industrial production continued retreating.</li>
<li>GDP probably contracted in Q2, but high inflation is currently more concerning to the BoE. It should help encourage more gradualism beyond August, though.</li>
</ul>


UK GDP declined again in April, meaning output has only grown in one of the past five months. High consumption around Easter and recovering car trade were overwhelmed.
Health output crashed as covid-related trade ended, professional services fell from their highs, and industrial production continued retreating.
GDP probably contracted in Q2, but high inflation is currently more concerning to the BoE. It should help encourage more gradualism beyond August, though.


<ul>
<li>Employment increased ahead of April’s jobs tax hike, and vacancies since then stayed high. Hours have also recovered despite depressed self-employment levels.</li>
<li>Firms appear to be focusing on retention, with bonus payments surging while regular pay growth slows. Nonetheless, wage settlements have been their highest since 2008.</li>
<li>This combination of rising wage deals and falling unemployment looks to be around a cyclical peak in underlying inflation pressures, probably pushing the BoE to hike in June.</li>
</ul>


Employment increased ahead of April’s jobs tax hike, and vacancies since then stayed high. Hours have also recovered despite depressed self-employment levels.
Firms appear to be focusing on retention, with bonus payments surging while regular pay growth slows. Nonetheless, wage settlements have been their highest since 2008.
This combination of rising wage deals and falling unemployment looks to be around a cyclical peak in underlying inflation pressures, probably pushing the BoE to hike in June.


<ul>
<li>UK GDP growth declined in March as new car deliveries got delayed until April. The trend also disappointed amid downwards revisions and unsustainably sourced strength.</li>
<li>Occasional jumps, mainly in the past, skew headline growth rates higher. GDP’s pace still seems to be quartered in Q2, now from 0.8% to 0.2% q-o-q.</li>
<li>Stagflationary pressures from extensive cost shocks sustain an uncomfortable policy trade-off. We still expect the BoE to hike in June and August before slowing the pace.</li>
</ul>


UK GDP growth declined in March as new car deliveries got delayed until April. The trend also disappointed amid downwards revisions and unsustainably sourced strength.
Occasional jumps, mainly in the past, skew headline growth rates higher. GDP’s pace still seems to be quartered in Q2, now from 0.8% to 0.2% q-o-q.
Stagflationary pressures from extensive cost shocks sustain an uncomfortable policy trade-off. We still expect the BoE to hike in June and August before slowing the pace.


UK 2Y (GUKG2 INDEX)

UK: Retail Resilience Revealed as Mirage

Hawkish hopes of retail resilience were built on sand. High inflation keeps squeezing real incomes and sales. Overdoing rate hikes risks recession,...

Phil Rush

UK: Strain Shows as Labour Cycle Turns

The peak cyclical pressure in the UK labour market may have passed, with the UR trend turning and wage growth not rising as much. A burn-out phase...

Phil Rush

UK: GDP Falls to Ill Health in Apr-22

UK GDP probably contracted in Q2, but high inflation is currently more concerning to the BoE. It should help encourage more gradualism beyond...

Phil Rush

UK: Labour Market Cycles Inflation Up

The UK's combination of rising wage deals and falling unemployment looks to be around a cyclical peak in underlying inflation pressures, probably...

Phil Rush

UK: Cars Drive GDP Growth Back a Month

UK GDP growth declined in March as new car deliveries got delayed until April. The trend also disappointed amid downwards revisions and...

Phil Rush