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 GDP bounced by 0.5% m-o-m in May amid broad-based activity growth. Postponing a bank holiday for the Jubilee may have briefly raised output as it did in 2002.</li>
<li>Activity trends still look broadly flat in 2022 with a worryingly high recession risk. The better May and supportive revisions mean the economy probably grew in Q2.</li>
<li>Given the bank holiday effect, the BoE will need to consider these data relative to the next release. Its August decision focuses more on the news about inflation persistence.</li>
</ul>


UK GDP bounced by 0.5% m-o-m in May amid broad-based activity growth. Postponing a bank holiday for the Jubilee may have briefly raised output as it did in 2002.
Activity trends still look broadly flat in 2022 with a worryingly high recession risk. The better May and supportive revisions mean the economy probably grew in Q2.
Given the bank holiday effect, the BoE will need to consider these data relative to the next release. Its August decision focuses more on the news about inflation persistence.


<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>The UK government doubled down on its energy price support, subtracting 0.4pp from our Oct-22 inflation forecast. The risk of the ONS not counting it is now worth 0.8pp.</li>
<li>Other measures may follow later, like removing the 5% VAT on electricity bills. Changing the headline VAT rate is a risk attracting significant market attention.</li>
<li>A 2.5pp VAT cut would probably take almost 1pp off headline inflation within two months. Some firms may take the opportunity to restore their profit margins.</li>
</ul>


The UK government doubled down on its energy price support, subtracting 0.4pp from our Oct-22 inflation forecast. The risk of the ONS not counting it is now worth 0.8pp.
Other measures may follow later, like removing the 5% VAT on electricity bills. Changing the headline VAT rate is a risk attracting significant market attention.
A 2.5pp VAT cut would probably take almost 1pp off headline inflation within two months. Some firms may take the opportunity to restore their profit margins.


United Kingdom

The British Pound Sterling is the official currency of The United Kingdom. 

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UK: GDP Bounce With Bonus Working Day

Postponing a bank holiday for the Jubilee may have briefly raised UK output in May as it did in 2002. The BoE's August decision focuses more on the...

Phil Rush

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: Fiscal Measures Against Inflation

A 2.5pp VAT cut would probably take almost 1pp off headline inflation within two months. Some firms may take the opportunity to restore their...

Phil Rush

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