March 26, 2021
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UK: consumers stop feeling special

  • UK retail sales rebounded by 2.1% m-o-m in Feb-21, as expected, leaving the level about 10% below the Oct-20 peak. GDP has been less sensitive to lockdown this time so won’t bounce by as much, although a 25% recovery of Jan-21’s fall would be good news.
  • Consumers have been shielded from the economic pain of lockdown but in March they stopped assuming that outperformance would extend through the year ahead. Mobility has improved recently but the UK remains among the most depressed in the world.

March 25, 2021
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Covid-consensus is over-optimistic

  • Enthused by vaccine success in some countries, the consensus appears to be centred on a modal "return to normal" outcome in H2.
  • We see a higher probability of a more restrictive outcome, with downside risks to a more cautious mode.
  • Continued curbs on international travel create a fractured global economy, while local flare-ups will lead to periodic domestic restrictions.

March 24, 2021
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UK: disinflation during lockdown disaster

  • UK inflation disappointed in Feb-21 as it slowed to 0.4% y-o-y on the CPI and held at 1.4% on the RPI. Garment prices were the weakest on record for a February CPI. Games also weighed on the CPI, with some payback likely, while the RPI was more hit by insurance.
  • Locked down clothing shops have struggled to shift stock, smothering a strange surge from 2020 at the start of 2021. Our forecasts are lowered by the news, especially on the RPI. Hawkish labour market news should at least offsets this for the BoE, in our view.