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>Energy supply is tightening due to intensified attacks in the Strait of Hormuz and a US hurricane. Fed minutes and ECB meeting accounts also confirm a tightening bias.</li>
<li>A failure by the UK Green Party leader to significantly increase support for the left in a by-election also reduces the political pressure on PM Burnham to loosen fiscal policy.</li>
<li>Next week features US inflation data that are set to show another rise with energy prices. UK GDP and the final EA inflation print are other highlights for us.</li>
</ul>


Energy supply is tightening due to intensified attacks in the Strait of Hormuz and a US hurricane. Fed minutes and ECB meeting accounts also confirm a tightening bias.
A failure by the UK Green Party leader to significantly increase support for the left in a by-election also reduces the political pressure on PM Burnham to loosen fiscal policy.
Next week features US inflation data that are set to show another rise with energy prices. UK GDP and the final EA inflation print are other highlights for us.


<ul>
<li>Energy prices are squeezing higher amid low inventories and resilient demand, building more inflation than many forecast.</li>
<li>Second-Round effects are small, but UK inflation expectations are anchored above the target, and monetary conditions aren’t tight.</li>
<li>We see hikes from the BoE in Nov-26 and the ECB/Fed in Dec-26. Market pricing looks too stretched given dovish policymaker bias.</li>
</ul>


Energy prices are squeezing higher amid low inventories and resilient demand, building more inflation than many forecast.
Second-Round effects are small, but UK inflation expectations are anchored above the target, and monetary conditions aren’t tight.
We see hikes from the BoE in Nov-26 and the ECB/Fed in Dec-26. Market pricing looks too stretched given dovish policymaker bias.


<ul>
<li>Higher EA inflation keeps the ECB on course for December, while disappointing US labour market data reduce the pressure to respond again more urgently than that.</li>
<li>Stronger UK GDP and faster credit growth stretch their inconsistency with the BoE’s dovish belief that policy is tight. It should begrudgingly make a first hike in November.</li>
<li>Next week is quiet for economic events. We’ll be watching for the Fed and ECB minutes, the Indian rate decision, and publishing our monthly from the road to Pakistan.</li>
</ul>


Higher EA inflation keeps the ECB on course for December, while disappointing US labour market data reduce the pressure to respond again more urgently than that.
Stronger UK GDP and faster credit growth stretch their inconsistency with the BoE’s dovish belief that policy is tight. It should begrudgingly make a first hike in November.
Next week is quiet for economic events. We’ll be watching for the Fed and ECB minutes, the Indian rate decision, and publishing our monthly from the road to Pakistan.


<ul>
<li>EA inflation jumped by 51bp to 3.76%, exceeding our relatively high forecast as the trend rise in pressures extended even further as the energy shock intensified.</li>
<li>Italy was the source of most upside news in an otherwise balanced set of national surprises. Higher services inflation at 3.22% drove the core rate up to 2.5%.</li>
<li>A 4% year-end peak has an upside-risk skew amid low gas inventories, encouraging the ECB to hike again in December. Its activism should ease a return to target in 2027.</li>
</ul>


EA inflation jumped by 51bp to 3.76%, exceeding our relatively high forecast as the trend rise in pressures extended even further as the energy shock intensified.
Italy was the source of most upside news in an otherwise balanced set of national surprises. Higher services inflation at 3.22% drove the core rate up to 2.5%.
A 4% year-end peak has an upside-risk skew amid low gas inventories, encouraging the ECB to hike again in December. Its activism should ease a return to target in 2027.


<ul>
<li>UK GDP growth was raised to 0.5% q-o-q in Q2, and we track Q3 at 0.4%, despite the energy supply shock and residual seasonality. Business investment boomed 5.2% y-o-y. </li>
<li>Utilities have driven all real investment in recent years, supported by outsized returns that are politically favoured while other businesses invest in more dynamic countries.</li>
<li>High energy utility returns over the long term crowd out riskier short-term investments and, as rates are fixed, push more duration than hyperscalers in the UK, squeezing gilts.</li>
</ul>


UK GDP growth was raised to 0.5% q-o-q in Q2, and we track Q3 at 0.4%, despite the energy supply shock and residual seasonality. Business investment boomed 5.2% y-o-y. 
Utilities have driven all real investment in recent years, supported by outsized returns that are politically favoured while other businesses invest in more dynamic countries.
High energy utility returns over the long term crowd out riskier short-term investments and, as rates are fixed, push more duration than hyperscalers in the UK, squeezing gilts.


Philip Rush is the Founder and Chief Economist of Heteronomics. Until launching in November 2016, he was Nomura's Senior European Economist and was the Chief UK Economist there since 2010. Before that, he was UK Economist at Barclays Wealth, where he also developed strategic asset allocation models for their market return portfolios. Philip started his career at Lehman Brothers covering the UK, Scandinavian and Swiss economies. A book on his fundamental framework was published in January 2018 as "Real Market Economics".

Phil Rush
Chief Economist
• Heteronomics

HEW: Broadly Blowing Tighter

Energy supply shocks and hawkish Fed/ECB signals are tightening the global outlook, while political pressure for fiscal loosening is easing in the...

Phil Rush

HEM: Oct-26 Views & Challenges

Low inventories and resilient demand are driving energy prices higher, stoking inflation. UK expectations sit above target and policy isn’t tight;...

Phil Rush

HEW: Patient Policy

Higher EA inflation keeps the ECB on track for a December hike, while weak US jobs ease urgency before then. Strong UK GDP and credit growth expose...

Phil Rush

EA: Inflation Biting Until Spring

EA inflation jumped to 3.76% as energy and services pressures intensified. With low gas inventories skewing inflation risks beyond a probable peak...

Phil Rush

UK: Utilities Crowd Out Investment

UK growth is resilient: Q2 GDP rose 0.5%, and business investment surged 5.2% y-o-y. But politically favoured utilities dominate, crowding out...

Phil Rush