JamesSmithRF
@jamessmithrf.bsky.social
Research Director at the Resolution Foundation. Previous lives at the Bank of England and in the civil service. Focussed mainly on macroeconomics (mainly).
Looking at expenditure, the picture is...confusing! Growth in Q3 is largely driven by investment (although not from business, which fell on the quarter!). The (poss) good news is ONS can find more expenditure than output, suggesting scope for revisions. Concerningly, consumption remains weak.
November 13, 2025 at 8:49 AM
Looking at expenditure, the picture is...confusing! Growth in Q3 is largely driven by investment (although not from business, which fell on the quarter!). The (poss) good news is ONS can find more expenditure than output, suggesting scope for revisions. Concerningly, consumption remains weak.
You can see the slowing more clearly in the monthly data with output contracting in September. Looking at sectors, there was an encouraging bounce back in services in Sep offset by very weak production, affected by weak car production (affected by Jaguar outage).
November 13, 2025 at 8:49 AM
You can see the slowing more clearly in the monthly data with output contracting in September. Looking at sectors, there was an encouraging bounce back in services in Sep offset by very weak production, affected by weak car production (affected by Jaguar outage).
If you look at growth relative to other rich countries, the UK looks mid-table for Q3 (although this comparison is made trickier by delays to US publication). Stepping back, the has been the second fastest growing G7 economy in the first 9 months of 2025- still decent growth by recent standards.
November 13, 2025 at 8:49 AM
If you look at growth relative to other rich countries, the UK looks mid-table for Q3 (although this comparison is made trickier by delays to US publication). Stepping back, the has been the second fastest growing G7 economy in the first 9 months of 2025- still decent growth by recent standards.
So growth slowed to a disappointing 0.1% in Q3 - this is *another* year (after 2023 and 2024) in which growth has slowed in the second half of the year after a promising start. Growth in Q3 was way below the post-pandemic normal (which itself is very weak!).
November 13, 2025 at 8:49 AM
So growth slowed to a disappointing 0.1% in Q3 - this is *another* year (after 2023 and 2024) in which growth has slowed in the second half of the year after a promising start. Growth in Q3 was way below the post-pandemic normal (which itself is very weak!).
On the growth outlook, here the BoE has been surprised to the upside by the data but think the near term will be weaker in Q3 2025 (partly because of Budget uncertainty!). Looking ahead the forecast is little changed.
November 6, 2025 at 1:54 PM
On the growth outlook, here the BoE has been surprised to the upside by the data but think the near term will be weaker in Q3 2025 (partly because of Budget uncertainty!). Looking ahead the forecast is little changed.
New scenarios show what might happen to rates if the hawkish camp are right. This is a step forward in transparency but the answer is a little hard to understand in that it suggest, yes, rates wd be higher; but they would be higher from 2026 onwards.
November 6, 2025 at 1:54 PM
New scenarios show what might happen to rates if the hawkish camp are right. This is a step forward in transparency but the answer is a little hard to understand in that it suggest, yes, rates wd be higher; but they would be higher from 2026 onwards.
With the Budget in mind, you can see that the BoE (like other forecasters) has a MUCH stronger wage growth projection than the OBR. This is part of the reason why we (at RF) expect a change in view here from the OBR. If so, that will push down on the forecast for borrowing significantly.
November 6, 2025 at 1:54 PM
With the Budget in mind, you can see that the BoE (like other forecasters) has a MUCH stronger wage growth projection than the OBR. This is part of the reason why we (at RF) expect a change in view here from the OBR. If so, that will push down on the forecast for borrowing significantly.
High inflation (and inf expectations) affect future inflation through their impact on domestic costs (i.e. wages). Here there has been more progress than BoE expected in Aug, BUT those voting for a cut are worried that wages will prove stickier than implied by the forecast.
November 6, 2025 at 1:54 PM
High inflation (and inf expectations) affect future inflation through their impact on domestic costs (i.e. wages). Here there has been more progress than BoE expected in Aug, BUT those voting for a cut are worried that wages will prove stickier than implied by the forecast.
The place where higher inflation (and inf expectations) have an impact is on wages. Here there has been more progress than BoE expected, BUT those voting for a cut are worried that wage growth will prove stickier than implied by the BoE forecast.
November 6, 2025 at 1:54 PM
The place where higher inflation (and inf expectations) have an impact is on wages. Here there has been more progress than BoE expected, BUT those voting for a cut are worried that wage growth will prove stickier than implied by the BoE forecast.
Lets start with *headline* inflation which BoE is very focused on. This is unusual, as it has been focused on prospects for *underlying* inflation until recently (the thing it can control). Here the outlook is v.little changed despite slight undershoot of inflation relative to forecast in September.
November 6, 2025 at 1:54 PM
Lets start with *headline* inflation which BoE is very focused on. This is unusual, as it has been focused on prospects for *underlying* inflation until recently (the thing it can control). Here the outlook is v.little changed despite slight undershoot of inflation relative to forecast in September.
Bank of England on hold at 4% on tight 5-4 vote with MPC minutes suggesting closer-than-expected decision. Big issue for today is outlook for inflation and new BoE comms. But this is also a key decision for the Chancellor ahead of the Budget. Thread on all that to follow...
November 6, 2025 at 12:14 PM
Bank of England on hold at 4% on tight 5-4 vote with MPC minutes suggesting closer-than-expected decision. Big issue for today is outlook for inflation and new BoE comms. But this is also a key decision for the Chancellor ahead of the Budget. Thread on all that to follow...
Disappointing UK PMI this morning with only a small bounce back after chunky fall in September. This is a key indicator for the BoE so the sliver of good news is that this probably keeps hopes of a rate cut alive for November.
October 24, 2025 at 1:04 PM
Disappointing UK PMI this morning with only a small bounce back after chunky fall in September. This is a key indicator for the BoE so the sliver of good news is that this probably keeps hopes of a rate cut alive for November.
Overall, a welcome downside inflation surprise. But this chart reminds you that UK inflation is still the highest in the G7. A big question going forward, then, is whether this is the start of a faster fall in inflation, or whether this will prove erratic.
October 22, 2025 at 8:21 AM
Overall, a welcome downside inflation surprise. But this chart reminds you that UK inflation is still the highest in the G7. A big question going forward, then, is whether this is the start of a faster fall in inflation, or whether this will prove erratic.
Today's lower-than-expected inflation is good news for mortgagors as it's a key piece of data ahead of next month's BoE rate decision. Sticky headline inf has been a worry, so today's number shd give more room for a cut. We shd now see inflation fall back towards 2% over the coming months.
October 22, 2025 at 8:21 AM
Today's lower-than-expected inflation is good news for mortgagors as it's a key piece of data ahead of next month's BoE rate decision. Sticky headline inf has been a worry, so today's number shd give more room for a cut. We shd now see inflation fall back towards 2% over the coming months.
With inflation at 3.8% the UC standard allowance will be uprated by at least 6.2% – a boost that is worth nearly £6 per week. While this uplift will be welcomed by many, it is smaller than the 6.4 per cent boost they would have seen had September inflation been 4 per cent, as widely forecast.
October 22, 2025 at 8:21 AM
With inflation at 3.8% the UC standard allowance will be uprated by at least 6.2% – a boost that is worth nearly £6 per week. While this uplift will be welcomed by many, it is smaller than the 6.4 per cent boost they would have seen had September inflation been 4 per cent, as widely forecast.
So good news that inflation is a lower. But September CPI inflation is used to uprate the benefits which millions of families rely on. This year, benefits were uprated by 1.7%, which was low outturn for 2024, but next year’s figure it will be today's 3.8% outturn.
October 22, 2025 at 8:21 AM
So good news that inflation is a lower. But September CPI inflation is used to uprate the benefits which millions of families rely on. This year, benefits were uprated by 1.7%, which was low outturn for 2024, but next year’s figure it will be today's 3.8% outturn.
The biggest contribution to the downside surprise came from services inflation. This was expected to rise to 5% but remained at 4.7%. A big part of this was a sharp fall in erratic airfares- which always drop between Aug and Sep but fell much more than usual this time.
October 22, 2025 at 8:21 AM
The biggest contribution to the downside surprise came from services inflation. This was expected to rise to 5% but remained at 4.7%. A big part of this was a sharp fall in erratic airfares- which always drop between Aug and Sep but fell much more than usual this time.
On the month the biggest upward contribution came from petrol (in transport on the left-hand chart). This is not because petrol is rising hugely in price (although it is a bit) this is past falls dropping out of the calculation (right chart).
October 22, 2025 at 8:21 AM
On the month the biggest upward contribution came from petrol (in transport on the left-hand chart). This is not because petrol is rising hugely in price (although it is a bit) this is past falls dropping out of the calculation (right chart).
Starting with the headline rates. CPI was 3.8% in September and how now been there for 3 months. This is the highest rate since early last year but the key thing for today is that it was expected to rise to 4% (by markets and BoE). So the is a BIG (and welcome) downside surprise.
October 22, 2025 at 8:21 AM
Starting with the headline rates. CPI was 3.8% in September and how now been there for 3 months. This is the highest rate since early last year but the key thing for today is that it was expected to rise to 4% (by markets and BoE). So the is a BIG (and welcome) downside surprise.
Slightly higher than forecast central government borrowing is almost entirely down to weaker tax receipts which are £1.3bn below forecast, mainly due to weaker income tax receipts. Again this is lower than suggested last month - more good news for the Chancellor.
October 21, 2025 at 8:19 AM
Slightly higher than forecast central government borrowing is almost entirely down to weaker tax receipts which are £1.3bn below forecast, mainly due to weaker income tax receipts. Again this is lower than suggested last month - more good news for the Chancellor.
Only £1.5bn of the £7.2bn above forecast borrowing is in central government – £3.0bn is in local authorities and £2.7bn is in public corporations.
October 21, 2025 at 8:19 AM
Only £1.5bn of the £7.2bn above forecast borrowing is in central government – £3.0bn is in local authorities and £2.7bn is in public corporations.
Borrowing was £20.2bn in Sep, the highest since 2020 and £0.1bn above OBR forecast. Borrowing is now £99.8bn for the first half of the fiscal year, £7.2bn above forecast. This is smaller than estimated in Aug (£11.4bn) given ONS revisions. This is good news for the Chancellor.
October 21, 2025 at 8:19 AM
Borrowing was £20.2bn in Sep, the highest since 2020 and £0.1bn above OBR forecast. Borrowing is now £99.8bn for the first half of the fiscal year, £7.2bn above forecast. This is smaller than estimated in Aug (£11.4bn) given ONS revisions. This is good news for the Chancellor.
Apologies - the chart for this failed to appear for some reason - here it is:
October 16, 2025 at 8:25 AM
Apologies - the chart for this failed to appear for some reason - here it is:
Finally, with the labour market data for August out on Tuesday, we can get a snap shot of what is happening to productivity growth. Here you can see that *based on RF's admin-based employment* productivity has been growing at levels not sustained since the financial crisis.
October 16, 2025 at 7:21 AM
Finally, with the labour market data for August out on Tuesday, we can get a snap shot of what is happening to productivity growth. Here you can see that *based on RF's admin-based employment* productivity has been growing at levels not sustained since the financial crisis.
If we look under the hood, the big concern is the flatlining of the service sector over the past couple of months that looks particularly worrying. Other sectors have been more erratic but the recent tendency has been for weaker manufacturing growth give global trade tensions.
October 16, 2025 at 7:21 AM
If we look under the hood, the big concern is the flatlining of the service sector over the past couple of months that looks particularly worrying. Other sectors have been more erratic but the recent tendency has been for weaker manufacturing growth give global trade tensions.