PowerPoint Presentation€¦ · . denmark. Title: PowerPoint Presentation Author: Jan-Willem Plomp
PowerPoint Presentation€¦ · Title: PowerPoint Presentation Author: McVittie, Eric Created Date:...
Transcript of PowerPoint Presentation€¦ · Title: PowerPoint Presentation Author: McVittie, Eric Created Date:...
UK Consumer Credit
Report
SampleReport
© Experian Economics
UK Sample Report
CONTENTS
1. Summary………………………………………………….3
2. Credit conditions………………………………………....4
3. Unsecured credit………………………………………....7
4. Secured lending………………………………………...10
5. Affordability: household incomes……………………12
6. Affordability: cost of living………………………….....15
7. UK prospects and key risks……………………..…….19
8. Consumers……………………………………………....20
9. Housing market………………………………………....22
10. Recent trends…………………………………………...24
11. Two-year outlook………………………………….........26
12. Labour market………………………………..……........28
UK Sample Report
© Experian Economics
UK 14 15 16 17 18-22
Interest Rate (%) 3.22 3.08 2.84 2.73 3.70
Gross Lending level (£billions) 203.7 220.6 246.8 257.5 238.0
Net Lending level (£billions) 23.5 34.9 40.4 43.2 116.4
Debt Stock (£billions) 1249 1274 1312 1350 1433
Write-offs (£billions) 0.5 0.4 0.1 0.1 0.3
Write-off rate (%) 0.010 0.008 0.003 0.002 0.005
Interest Rate (%) 12.4 11.8 12.3 11.6 12.0
Gross Lending level (£billions) 224.2 244.7 260.1 273.8 302.1
Net Lending level (£billions) 10.4 14.6 18.8 18.2 15.9
Debt Stock (£billions) 163.8 175.5 187.9 202.3 242.1
Write-offs (£billions) 2.5 2.7 2.4 2.2 5.1
Write-off rate (%) 0.395 0.390 0.328 0.277 0.319
© Experian Plc 2017
Secured Credit
Unsecured Credit
Summary
A disorderly transition to a
‘Hard’ Brexit’ is the key risk to
our central case scenario, as
it could negatively impact on
business confidence,
investment and hiring. The
possibility of lingering above
target inflation also poses a
downside risk to the
consumer spending outlook.
Credit forecast summary*
Bank of England raises rates to 0.75%
In line with our forecasts, the nine-strong Monetary Policy Committee (MPC) have voted unanimously to
increase Bank Rate by 25bps, to 0.75%, only the second rise since the financial crisis.
The MPC’s decision to hike rates was driven by a perceived requirement to combat domestic cost
pressures, namely from wagegrowth, that they say are building in line with a tightening labour market.
However, in the longer term movements in pay tend to closely mirror the trend in productivity (output per
worker) through its impact on the amount of revenue that companies generate, and ultimately what they
can afford to pay their employees.
Productivity has remained stubbornly low since the financial crisis, but the MPC expects growth to pick
up slowly in the coming quarters, reaching an annual rate of around1¼% by xxxx.
Given their assumptions on productivity and wage growth, as well as an expectation that import cost
pressures will continue to ease in line with the diminishing impact of sterling's deprecation on import
prices, the MPC has repeatedly stressed that any future increases in Bank Rate are likely to be at a
gradual pace and to a limited extent.
Our central macroeconomic forecast for the UK continues to be predicated on a steady rise in base rate
to 1.5% by the end of xxxx. The potential outcome of Brexit negotiations presents an ongoing risk to the
outlook both to the upside and downside, and the MPC have not ruled out a rate cut if economic
conditions should deteriorate.
*Credit forecasts are consistent with our July 2018 macroeconomic forecast
UK Sample Report
© Experian Economics
-4
-2
0
2
4
6
8
10
12
14
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
An
nu
al g
row
th r
ate
%
Source: National Statistics, Experian
SecuredUnsecured
Lending remains firm
The latest Bank of England data shows that net lending secured
on dwellings came in at £3.9 billion in June, up fractionally from
May and exceeding the six month average of £3.5 billion.
Annual growth for mortgage lending was unchangedat 3.2%.
Consumer credit net lending came in at £1.6 billion in June,
unchanged from May, but up compared to the six month
average of £1.4 billion. Within consumer credit, net credit card
lending and other loans and advances were also both
unchanged at £0.5 billion and £1 billion respectively, broadly in
line with their six month averages. Furthermore, the annual rate
of growth in total net lending held steady at 8.8%. The gains
remain rapid relative to the post recession average, though have
eased by roughly 0.5 percentage points compared to the start of
the year, and are down from a peak of 10.9% in November
xxxx.
Lenders responding to the Bank of England Credit Conditions
Survey (CCS) reported that supply of credit in the secured and
unsecured markets was flat in q2. They expected supply to be
broadly unchanged in the secured credit market in q3, but
decrease slightly for unsecured credit, with credit scoring criteria
likely to become significantly tougher. The CSS also shows that
respondents anticipate a pick-up in demand for unsecured credit
and secured lending for mortgaging, but no change in lending
for house purchase. This follows a flat q2 in the unsecured
market, but an increase in the secured lending market.
Near-term outlook: Demand for unsecured credit remains
strong, while in the secured credit market the near-term outlook
looks flat. On balance, a tightening in regulation in the consumer
credit market is anticipated to underline a modest slowdown in
overall net lending to below 3% (year-on-year) by xxxxq4, from
near 4% in xxxxq2. While mortgage rates remain supportive, a
modest tightening in q2 and going into q3 will also take the edge
off what will still be a very strong growth rate by historic
standards.
Credit conditionsAnnual growth of net lending to households
Market average retail interest rates
4**Our forecasts were locked on 10 February
0
2
4
6
8
10
12
14
16
2005
2007
2009
2011
2013
2015
2017
2019
2021
Inte
rest
Rat
e %
Source: National Statistics, Experian
SecuredUnsecured
UK Sample Report
© Experian Economics
Credit conditions
Gross lending to households (quarterly) Net lending to households (quarterly)
Total outstanding loans to households Write off rates on loans to households
5
0
10
20
30
40
50
60
70
80
90
100
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
£ B
illio
n, c
urr
ent
pri
ces
Source: National Statistics, Experian
SecuredUnsecured
-5
0
5
10
15
20
25
30
35
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
£ B
illio
n ,
curr
ent
pri
ces
Source: National Statistics, Experian
SecuredUnsecured
100
110
120
130
140
150
160
170
180
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
% o
f Ho
use
ho
ld D
isp
osa
ble
Inco
me
£ B
illio
n ,
curr
ent
pri
ces
Source: National Statistics, Experian
Outstanding Loans
%of income (right axis)
0.00
0.01
0.02
0.03
0.04
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Wri
te o
ffs,
% o
f o
uts
tan
din
g
Source: National Statistics, Experian
UnsecuredSecured (right axis)
UK Sample Report
© Experian Economics
Credit conditions
Secured loans: Approvals & gross lending Secured loans: Interest rates
Growth forecasts: Secured net lending Interest payments as % of household income
6
0
2
4
6
8
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
20
22
Interest - Secured Interest - Unsecured
Sources: Bank of England, National Statistics, Experian
% o
f U
K H
ou
seh
old
Dis
posable
Incom
e
0
2
4
6
8
10
12
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
An
nu
al g
row
th r
ate
%
Secured
Source: National Statistics, Experian
0
0.2
0.4
0.6
0.8
1
1.2
0
5000
10000
15000
20000
25000
30000
2011
2012
2013
2014
2015
2016
2017
2018
Annual Growth %
£ mill ion
Source: Bank of England
Lending Approvals
0
1
1
2
2
3
3
4
4
5
5
2011
2012
2013
2014
2015
2016
2017
2018
Inte
rest
rat
e %
Source: Bank of England
BofE Rate Variable 2yr Fixed
3yr Fixed SVR
UK Sample Report
© Experian Economics
Unsecured lendingGrowth expected to slowConsumer credit net lending came in at £1.6 billion in June,
unchanged from May, but up compared to the six month average of
£1.4 billion. Within consumer credit, net credit card lending and other
loans and advances were also both unchanged at £0.5 billion and £1
billion respectively, broadly in line with their six month averages.
Furthermore, the annual rate of growth in total net lending held
steady at 8.8%. The gains remain rapid relative to the post recession
average, though have eased by roughly 0.5 percentage points
compared to the start of the year, and are down from a peak of
10.9% in November xxxx.
Lenders responding to the CCS reported that the availability of
unsecured credit to households was unchanged in q2 and was
expected to decrease slightly in q3. Credit scoring criteria for the
granting of other unsecured loans were reported to have become
significantly more tough and the proportion of applications that were
approved fell slightly. Conversely, the proportion of approvals of
credit card loan applications increased significantly.
Respondents to the CCS also reported that demand for unsecured
lending was unchanged in q2, but they expected an increase in q3.
Lender expectations were underlined by an anticipated rise in credit
card lending, offsetby a slight decrease for other unsecured lending.
In terms of loan pricing, CCS respondents reported a tightening in
spreads in q2, driven by a significant narrowing in spreads on other
unsecured lending products. Overall unsecured lending spreads
were expected to widen slightly in q3. Bank of England data also
shows that while quoted rates on new £5000 and £10,000 were
slightly lower in June than they were in December last year, they are
higher than they were a year ago, and have crept up in recent
months.
On balance, we expect a tightening in credit scoring criteria and
marginally less supportive interest rates to underline an easing in
consumer credit growth (year-on-year) from 8.2% in xxxxq2 to a little
over 7% by xxxxq4. Growth at these rates is well above the historic
average, and reflects continuing strong demand.
Unsecured net lending to households
Retail interest rates: Unsecured loans
7
-10
-5
0
5
10
15
20
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
An
nu
al g
row
th r
ate
%
Source: National Statistics, Experian
Total
Credit Cards
Other
0
5
10
15
20
25
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Inte
rest
rat
e %
Source: National Statistics, Experian
Total
Credit Cards
Other
UK Sample Report
© Experian Economics
Unsecured lending
Unsecured gross lending (quarterly) Unsecured net lending (quarterly)
Outstanding unsecured loans to households Write off rates on unsecured loans
8
0
10
20
30
40
50
60
70
80
90
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
£b
illio
n, c
urr
ent
pri
ces
Source: National Statistics, Experian
Total
Credit Cards
Other
-3
-2
-1
0
1
2
3
4
5
6
7
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
£ b
illio
n, c
urr
ent
pri
ces
Source: National Statistics, Experian
Total
Credit Cards
Other
0
50
100
150
200
250
300
20
05
20
07
20
09
20
11
20
13
20
15
20
17
20
19
20
21
Other
Credit Cards
Sources: National Statistics, Bank of England, Experian
£ b
illio
n,
curr
ent
prices
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Wri
te-o
ffs,
% o
f Ou
tsta
nd
ing
Source: National Statistics, Experian
Credit Cards
Other
UK Sample Report
© Experian Economics
2017Q4 2017Q1 2018Q2 2017Q4 2017Q1 2018Q2
Availability of Unsecured Credit to Households -12.40 -38.70 -4.30 -24.30 3.70 -7.70
Demand for Unsecured Lending -8.1 -15.2 4.4 2.5 5.7 12.3
Credit Cards -2.70 -21.30 2.30 3.00 10.40 16.00
Other Unsecured -32.5 13.1 15.4 0.3 -16.2 -5.8
Credit Scoring Criteria -12.40 -24.60 -4.50 -24.00 -8.90 -5.70
Credit Cards -9.2 -24.9 -1.0 -25.8 -5.7 0.3
Other Unsecured -27.00 -23.30 -22.40 -15.80 -23.60 -35.50
Proportion of Applications Approved -17.6 -23.9 21.7 -32.9 8.8 14.7
Credit Cards -16.70 -26.20 27.40 -33.40 16.40 21.50
Other Unsecured -21.7 -13.2 -6.6 -31.1 -27.1 -19.7
Average credit quality of new lending 0.60 0.20 14.90 6.40 8.70 12.70
Credit Cards -4.3 2.1 13.1 5.7 8.9 12.6
Other Unsecured 22.90 -8.60 24.00 9.30 7.80 13.50
Lending Spreads 15.8 20.6 11.9 -4.1 -2.3 -6.2
Credit Cards 16.80 20.90 8.90 -9.90 -6.50 -6.30
Other Unsecured 12.3 16.6 25.6 20.3 17.9 -4.9
Credit Card Limits 4.40 -8.20 15.90 -5.70 13.90 -1.20
Minimum payments of credit card balances 4.1 3.2 0.9 4.1 0.0 0.9
Default Rates 15.30 13.70 19.50 12.30 7.60 13.60
Credit Cards 16.7 12.3 21.1 17.6 5.7 15.4
Other Unsecured 8.90 19.80 11.90 -11.60 16.40 4.80
Losses Given Default 10.7 -15.8 -9.1 10.1 10.1 -1.2
Credit Cards 11.30 -17.90 -9.60 11.00 11.00 0.00
Other Unsecured 7.8 -6.2 -6.5 5.9 6.2 -7.1
Source: Bank of England
Previous 3 Months Next Three Months
Unsecured lendingSummary of credit conditions survey responses: Unsecured lending to households
9
Availability of unsecured credit to households Demand for unsecured loans by households
-40
-20
0
20
40
60
80
2012 2013 2014 2015 2016 2017 2018
All Cards Other
Net
%bala
nce w
eig
hte
d b
y m
ark
et
share
Source: Bank of England
-50
-40
-30
-20
-10
0
10
20
30
2012 2013 2014 2015 2016 2017 2018
Past 3 mthsNext 3 mthsN
et
%bala
nce w
eig
hte
d b
y m
ark
et
share
Source: Bank of England
UK Sample Report
© Experian Economics
Secured lending
Borrowing likely to slow The latest Bank of England data shows that net lending secured on
dwellings came in at £3.9 billion in June, up fractionally from May
and exceeding the six month average of £3.5 billion. Annual growth
for mortgage lending was unchanged at 3.2%.
Lenders responding to the CCS reported that the availability of
secured credit to households was unchanged again in the three
months to mid-June xxxx and they expected no change over the
next three months to mid-September xxxx. At the same time they
reported that household demand for secured lending for
remortgaging increased in q2, and expected demand to increase
slightly in Q3. Demand for secured lending for house purchase was
reported to have been unchanged in Q2, and was expected to be
unchanged in Q3.
Interest rates on secured lending remain extremely supportive.
According to the CCS overall spreads on secured lending to
households — relative to Bank Rate or the appropriate swap rate
— narrowed significantly in xxxxq2, for the sixth consecutive
quarter. Within this, spreads on both buy-to-let and prime lending
were reported to have tightened. A slight widening of spreads is.
expected in xxxxq3, driven by prime lending,.
The most recent Bank of England data on quoted rates which
covers June, shows some divergence in fixed rate mortgages
across the various product types. However, in general rates have
crept up slightly in the first two quarters of this year, though remain
lower than they were a year ago
The August hike in Bank Rate from 0.5% to 0.75% has already
prompted a number of major lenders to increase rates on their
standard variable mortgages and tracker mortgages. Other lenders
are expected to follow suit in the coming months, and rates on fixed
deals are also likely to creep up.
With mortgage rates becoming marginally less supportive and
household budgets remaining under pressure, given above target
inflation and historically weak, albeit accelerating wage growth, the
increases in net secured lending are anticipated to ease to a little
under 2% (year-on-year) by xxxxq4, from over 3% in xxxxq2.
Secured lending to households (quarterly)
Retail interest rates: Mortgages
10
0
10
20
30
40
50
60
70
80
90
100
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
£ b
illi
on
, cu
rre
nt p
rice
s
Source: National Statistics, Experian
Net
Gross
0
1
2
3
4
5
6
7
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Inte
rest
rat
e %
Mortgage
Sorce: National Statistics, Experian
UK Sample Report
© Experian Economics
Secured lending
Availability of secured credit to households Demand for secured loans by households
Summary of credit conditions survey responses: Secured lending to households
11
2017Q4 2017Q1 2018Q2 2017Q4 2017Q1 2018Q2
Availability of Secured Credit to Households 1.50 3.80 4.00 4.20 3.80 -4.10
High LTV (> 75%) 3.9 5.5 10.7 1.8 -7.6 1.9
Low LTV (<= 75%) 1.20 17.00 -6.70 6.50 -13.70 2.30
Demand for House Purchase 8.20 -29.30 4.90 -0.20 23.10 0.70
Prime 5.5 -27.0 4.1 -9.1 20.4 -1.9
Buy-to-Let 2.30 -24.50 6.90 -7.30 12.40 -2.90
Demand for Re-mortgaging 49.1 -22.5 16.7 1.7 29.6 8.1
Willingness to lend with < 10% equity 0.4 0.1 -5.1 4.9 7.6 3.8
Credit Scoring Criteria -1.00 -3.50 -0.20 -0.90 -5.60 -9.80
Proportion of Applications Approved 4.4 -18.5 4.7 -4.6 0.2 -3.2
Average credit quality of new lending -4.50 -0.90 -0.30 0.00 -0.90 1.60
Maximum Loan to Value 0.0 0.0 3.0 -3.6 0.0 -3.3
Maximum Loan to Income -8.90 -7.60 2.30 -7.60 5.50 1.60
Lending Spreads 39.60 60.00 29.70 3.10 20.80 -6.40
Prime 41.6 60.0 29.2 1.3 20.8 -6.4
Buy-to-Let 38.90 43.60 36.20 3.20 23.80 6.40
Lending Fees -5.3 10.5 -9.0 0.0 4.0 0.0
Source: Bank of England
Previous 3 Months Next Three Months
-40
-30
-20
-10
0
10
20
30
40
2012 2013 2014 201520152016 2017 2018
Past 3 mths
Next 3 mths
Net
%bala
nce w
eig
hte
d b
y m
ark
et
share
Source: Bank of England
-60
-40
-20
0
20
40
60
80
2012 2013 2014 201520152016 2017 2018
House Purchase: Past 3 mthsRemortgage: Past 3 mths
Net
%bala
nce w
eig
hte
d b
y m
ark
et
share
Source: Bank of England
UK Sample Report
© Experian Economics
The latest Office for National statistics (ONS) data shows
that real household disposable income grew by 0.3% q-on-q
in xxxxq1, following a contraction of 0.5% year-on-year in
xxxx as a whole – the weakest annual rate since xxxx. This
underlined an increase of 0.2% in household spending, in
line with the gains in the three quarters prior, but well down
on the three-year and five-year averages.
Through q2 and going into q3 incomes remained under
severe pressure. In July inflation accelerated to 2.5%, from
2.4% a month earlier, the first rise since November xxxx. At
the same time total pay growth in the year to April – June
eased to 2.4%.
In the coming months diminishing import cost pressures
linked to sterling’s depreciation in xxxx are expected to exert
downward pressure on inflation, however much of this will be
offset by higher fuel costs, and this should keep inflation
above the Bank of England’s 2% target until the end of the
year.
In terms of pay, tight labour market conditions and low
unemployment should see growth slowly pick up, as it
becomes more difficult for firms to recruit and retain staff. In
the longer term productivity is also anticipated to make a
modest recovery, providing further support to pay growth
through its impact on the amount of revenue that companies
generate, and ultimately what they can afford to pay their
employees.
On balance, given a modest up-tick in pay and gently easing
inflation, real disposable incomes are anticipated to grow by
around 1.5% this year, although this has to be viewed in light
of an increase of just 0.2% last year. Beyond this the gains
are forecast to average 0.7% between xxxx and xxxx, before
recovering to nearer 2% a year thereafter.
Affordability: Household incomes
Real incomes remain under pressure
Employment incomes to improve through 2018
12
-4
-3
-2
-1
0
1
2
3
4
5
6
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
An
nu
al G
row
th R
ate
%
Source: National Statistics, Experian
RPDI
RPDI per person
-6
-4
-2
0
2
4
6
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
An
nu
al G
row
th R
ate
%
Source: National Statistics, Experian
Employment Income
Employment Income per person
UK Sample Report
© Experian Economics
Affordability: Household incomes
Public sector wage freeze bites Real earnings should pick-up gradually
Household Income flat for some time Incomes remain constrained
13
-1
0
1
2
3
4
5
2010
2011
2012
2013
2014
2015
2016
2017
2018
Bal
ance
, Co
nfi
den
ce -
Turn
ove
r
Source: British Chamber of Commerce
Whole EconomyPrivate SectorPublic Sector
200
250
300
350
400
450
2010
2011
2012
2013
2014
2015
2016
2017
Rea
l Wee
kly
Ho
use
ho
ld In
com
e P
er P
erso
n, £
Source: National Statistics, Experian
Disposable
Disposable excluding property
Disposable excluding propertypayments
-6
-4
-2
0
2
4
6
8
10
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
An
nu
al G
row
th o
f Rea
l In
com
e p
er P
erso
n, %
Source: National Statistics, Experian
Employment Income
Social Benefits
Gross income
Net Income
-4
-2
0
2
4
6
8
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
% c
han
ge, y
ear-
on
-yea
r
Source: National Statistics, Experian
Average Earnings
CPI Inflation
Real Average Earnings
UK Sample Report
© Experian Economics
Affordability: Household incomesHousehold Incomes are relatively resilient in London and the south of England
Outstanding debt as % of household income Interest payments as % of household income
14
0
2
4
6
8
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
20
22
Interest - Secured Interest - Unsecured
Sources: Bank of England, National Statistics, Experian
% o
f U
K H
ou
seh
old
Dis
posable
Incom
e
0
20
40
60
80
100
120
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
20
22
Secured Unsecured
Sources: National Statistics, Bank of England, Experian
% o
f U
K H
ousehold
Dis
posable
Incom
e
-1
0
1
2
3
4
5
North
East
North
West
Yorks &
Humber
East
Midlands
West
Midlands
East London South
East
South
West
Wales Scotland Northern
Ireland
UK
2005-08 2009-13 2014-16
2017 2018-22
% C
hange,
year-
on-y
ear
Source: National Statistics, Experian
Real Disposable Household Income
UK Sample Report
© Experian Economics
Inflation still above target
Consumer price inflation (CPI) rose to 2.5% in July, up from 2.4%
in June. This is the first rise in the rate since November xxxx.
Transport continued to make the largest upward contribution to
the 12-month rate, with a 5.7% increase in prices, the largest rise
in over a year. The uptick was underlined by growth of 12.4% in
the price of fuels and lubricants. Global oil prices have eased back
somewhat in recent months after peaking in May, but remain
much higher than they were a year ago. Brent Crude is currently
trading at over 70 dollars a barrel, compared to less than 55
dollars a barrel last summer. In addition, as oil is priced in
dollars, the recent weakening in the sterling/dollar
exchange rate has pushed up fuel import costs.
Amongst the other components of CPI import cost pressures
have generally diminished over the past year, as the much larger
depreciation of sterling in xxxx drops out of the annual
comparison. This can be seen in the latest producer price data
which shows an easing in the headline rate of inflation for goods
leaving the factory gate (output prices) to 3.1% in the year to July,
down from 3.3% in June. Conversely, prices for materials and
fuels (input prices) rose to 10.9%, up from 10.3%. However, more
than seven percentage points of this increase is attributable to
price movements for crude oil.
Clothing & footwear, a heavily imported good made the largest
downward contribution to the 12-month rate in July, with prices
falling by 0.4% year-on-year. This is the largest drop since
October xxxx, and compares to annual rises of well above 3% in
the Spring. Furthermore, core inflation which strips out the more
volatile components of the headline index, including fuel, was
unchanged at 1.9%, compared to 2.7% at the beginning of the
year.
Diminishing import cost pressures are expected to
continue to exert downward pressure on inflation, however
much of this will be offset by higher fuel costs. This should
keep inflation above the Bank of England’s 2% target until
the end of the year.
Affordability: Cost of living
CPI inflation well above BoE target
Inflation has probably peaked
15
-1
0
1
2
3
4
5
6
2010
2011
2012
2013
2014
2015
2016
2017
2018
% c
han
ge, y
ear-
on
-yea
r
Source: National Statistics
CPI RPI
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
An
nu
al %
ch
ange
CPI Inflation
Source: National Statistics, Experian
UK Sample Report
© Experian Economics
Affordability: Cost of living
CPI above BoE target Core inflation rose last year
Increases in food & energy (transport) prices drive general inflation higher
16
-1
0
1
2
3
4
5
6
2010
2011
2012
2013
2014
2015
2016
2017
2018
% c
han
ge, y
ear-
on
-yea
r
Source: National Statistics
CPI CPIY CPIH
-1
0
1
2
3
4
5
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
% c
han
ge, y
ear-
on
-yea
r
Source: National Statistics
CPI CPIY CPIH Core CPI
YTD
-4
-2
0
2
4
6
8
10
12
All Ite
ms
Foo
d
Alc
oh
ol
Clo
thin
g
Hou
sing
Furn
iture
etc
.
Hea
lth
Tra
nsport
Com
mun
icatio
n
Recre
atio
n
Edu
cation
Hospita
lity
Mis
c.
All g
oods
All s
erv
ices
2008-11 2012-2016 2017 2018 (YTD)
% a
nnual
incre
ase
Source: National Statistics, Experian
UK Sample Report
© Experian Economics
Bank rate at 0.75%
Central scenario:
In line with our forecasts, the nine-strong Monetary Policy
Committee (MPC) voted unanimously to increase Bank Rate by
25bps, to 0.75% at their August rate setting meeting, only the
second rise since the financial crisis.
The MPC’s decision to hike rates was driven by a perceived
requirement to combat domestic cost pressures, namely
from wage growth, that they say are building in line with a
tightening labour market. In the longer term they also
highlighted that inflationary pressures were expected to
build in line with a gently up-tick in productivity.
Given the mild upward anticipated trajectories for wage
growth and productivity the MPC stated that any future
increases in Bank Rate are likely to be at a gradual pace
and to a limited extent.
Our central macroeconomic forecast for the UK continues to be
predicated on a steady rise in base rate to 1.5% by the end of xxxx.
Risks to the central scenario:
1. The renewed depreciation of sterling intensifies keeping
inflation above target for longer, as import cost pressures
linger. As oil is traded globally in dollar terms, sterling's
weakness against the dollar is an acute risk, particularly
while oil prices remain relatively high.
2. Export led output growth creates inflationary pressures
as the global economic outlook strengthens.
3. A marked pick-up in domestic price growth emerges as
the remaining slack in the economy is absorbed or
productivity improves.
4. A disorderly transition to a ‘Hard’ Brexit’ leads to a
protracted period of weak business confidence, lower
investment and a reduction in hiring, dampening inflation.
Affordability: Interest rate prospects
Bank rate to rise very slowly
Mortgage and credit card interest rates
17
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
Inte
rest
Rat
e, %
BoE Base Rate
Source: National Statistics, Experian
0
2
4
6
8
10
12
14
16
18
20
22
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
Inte
rest
Rat
e %
Source: National Statistics, Experian
Mortgage
Credit card
UK Sample Report
© Experian Economics
Affordability: Interest rate prospectsLabour costs set for modest increases Sterling remains relatively weak for now
Inflationary pressures continue to bite Interest rates to rise very gradually
18
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
An
nu
al %
ch
ange
Unit Labour Costs
Source: National Statistics, Experian
75
85
95
105
115
125
135
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
Ind
ex, 2
00
5 =
10
0
Sterling effective exchange rate
Source: National Statistics, Experian
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
% c
han
ge, y
ear-
on
-yea
r
GDP Deflator
Source: National Statistics, Experian
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
Inte
rest
Rat
e %
Source: National Statistics, Experian
BoE Base Rate
3 Month LIBOR
© Experian Economics
UK August 2018
2015 2016 2017 2018 2019
US$ per £ (y/e) 1.52 1.24 1.33 1.37 1.39
£ per € (y/e) 0.72 0.87 0.91 0.87 0.86
REER (Jan 2005=100) 117.3 97.7 99.3 102.3 104.1
UK Prospects & Key Risks
Recent
Trends
UK GDP growth accelerated to 0.4% (q-on-q) in
xxxxq2, up from 0.2% in the previous quarter.
Business
Planning
Assumptions
The MPC voted unanimously at their August
meeting to increase Bank Rate by 25bps, to
0.75%, only the second rise since the financial
crisis. Future increases are likely to be at a
gradual pace and to a limited extent.
2-Year
Outlook
Real GDP growth is forecast to grow by 1.4% this
year, down from 1.8% in xxxx.
Key risks: The momentum gathering in the global
economy falters. The emerging trade war between
China and the USA is of particular concern. Wage
growth fails to accelerate holding back consumer
spending further. Brexit related uncertainty
negatively impacts on business investment and
consumer confidence.
Longer-Term
Outlook
GDP growth of 1.6% a year in xxxx-xx, with annual
employment growth of 0.5%.
Key risks: Public finances suffer from low economic
growth and relaxation of austerity to support the
economy. High debt exposure of public and private
sectors becomesa serious burden.
Consumer Spending growth to be sustained but at a much
slower pace than in recent years.
Key risks: Lingering above target inflation and weak
earnings growth inhibit spending. Further Bank Rate
hikes hit highly-exposed borrowers.
Trade Trade should continue to benefit from sterling’s
weakness.
Key risk: As sterling eventually appreciates, export
price competitiveness diminishes and production
output growth falters.
Inflation Inflation accelerated to 2.5% in July.
Key risk: There is a renewed depreciation in
sterling, and associated import price pressures build.
The upward trend in global oil prices continues.
Labour
Market
Current strong employment growth should ease,
however competition for employees is expected see
pay growth accelerate mildly through xxxx.
Key risk: Productivity gains stall, constraining pay.
Government Fiscal policy expected to loosen in the coming year
as suggestedby the Chancellors Spring Statement.
Key risk: An easier fiscal stance could raise
concerns about the impact of high government debt
on growth prospects.
Interest ratesIn line with our forecasts, the nine-strong
MPC have voted unanimously to increase
Bank Rate by 25bps, to 0.75%, at the
August rate setting meeting, only the
second rise since the financial crisis. The
MPC’s decision to hike rates was driven by
a perceived requirement to combat
domestic cost pressures, namely from
wage growth, that they say are building in
line with a tightening labour market.
KEY RISK
The possibility of a fresh Sterling depreciation
as Brexit uncertainties persist is a key inflation
risk. This could lead to higher interest rates,
earlier than in the Base case.
Exchange ratesThe Bank of England’s effective exchange rate
index, a weighted average of the movements in
cross-exchange rates against a basket of other
currencies had been steadily rising in the year
to April on expectations of a May rise in Bank
Rate. However, with the interest rate rise failing
to materialise, the exchange rate subsequently
eased back. The August rate rise has of yet
done little to reverse the downward trend.
KEY RISK S
Consumers will benefit as inflation slowly
eases in line with softer import prices.
However, household budgets remain under
pressure and this is expected to continue to
hold back outturns in the services industries,
the main engine of the UK economy,
throughout xxxx. If consumer confidence
deteriorates further, any consumption driven
recovery could falter. Furthermore, the slight
narrowing in the trade deficit in xxxx, is not
enough to suggest that export led sectors such
as manufacturing can plug the gap left by
reduced services sector gains.
19
(% per annum) 2015 2016 2017 2018 2019
Base rate (y/e) 0.50 0.25 0.50 0.75 1.00
10 yr yield (y/e) 1.88 1.26 1.30 1.85 2.65
© Experian Economics
UK August 2018
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
% c
han
ge, y
ear-
on
-yea
r
Private Consumption
Source: National Statistics, Experian
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
% b
alan
ce
Consumer Confidence
Source: GFK and Experian
Consumer spending growth slows Real household disposable income grew by 0.3% q-on-q
in xxxxq1, following a contraction of 0.5% year-on-year in
xxxx as a whole – the weakest annual rate since xxxx.
This underlined an increase of 0.2% in household
spending, in line with the gains in the three quarters prior,
but well down on the three-year and five-year averages.
Consumer spending, had been growing at roughly 0.8% a
quarter in the six quarters to xxxxq2. Sterling then
depreciated markedly following the Brexit vote in June
xxxx, which fed through to a sharp rise in inflation and an
erosion of real incomes. This has underlined a slowdown
in growth to nearer 0.3% a quarter in the xxxxq3 - xxxxq1
period.
More up-to-date retail sales data suggests that consumer
spending may have strengthened somewhat in q2 and
going in to q3. Retail sales volumes, which account for
roughly a third of consumer spending grew by 2.1% in the
three months to May – July, the largest increase since
January xxxx.
Growth was driven largely by a healthy rise in food store
sales, with supermarkets appearing to have benefited in
some part from exceptionally good weather conditions,
and high profile events such as the World Cup and Royal
Wedding. Sales of summer clothing also offered support,
briefly bucking an otherwise downward trend. Growth in
the other components of retail sales was less assured.
It is likely that some of the weather driven gains in retail
spending will unwind in the coming months as the
weakness in household budgets comes to the fore once
more. Furthermore, an uptick in inflation to 2.5% in July,
and an easing in total pay rises to 2.4% in the year to
April – June has intensified the pressure on real incomes.
Given this backdrop we expect consumer spending in
2018 to come in at 1.0% in xxxx as a whole, down from
1.7% in xxxx.
Consumers
Consumer confidence still below pre-
referendum levels….
…predicating a slowdown in consumer spending
20
UK Sample Report
© Experian Economics
ConsumersReal household incomes in the doledrums Savings rate remains low
Spending growth to remain muted for some time Retail sales come under pressure
21
-2
-1
0
1
2
3
4
5
6
7
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
% c
han
ge, y
ear-
on
-yea
r
Retail Sales
Source: National Statistics, Experian
-4
-3
-2
-1
0
1
2
3
4
5
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
% c
han
ge, y
ear-
on
-yea
r
Consumer Spending
Source: National Statistics, Experian
-3
-2
-1
0
1
2
3
4
5
6
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
% c
han
ge, y
ear-
on
-yea
r
Real Disposable Income
Source: National Statistics, Experian
0
2
4
6
8
10
12
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
Rat
e, %
Savings Rate
Source: National Statistics, Experian
UK August 2018
© Experian Economics
-8
-6
-4
-2
0
2
4
6
8
10
12
14
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
% c
han
ge, y
ear-
on
-yea
r
Source: National Statistics, Experian
Price growth expected in the 2-3% range in xxxxThe latest RICS residential market survey shows that newly
agreed sales (which had been negative for sixteen
consecutive months) stayed flat in July, pointing to ongoing
weakness in sales activity. On the demand side, new buyer
enquires finally registered a muted positive reading
following 17 months of no growth, while on the supply side,
the number of new instructions faltered after a positive
outturn in May and June. The supply side uplift in these two
months had followed 26 months of decline and had been
expected to be short-lived with the rate of new appraisals of
property by valuers once again down on the year.
Bank of England data showed a small rise in the number of
loans available for house purchase in q2 (65,600 in June,
up from 63,100 in March). However, HMRC data also for
June states that the number of residential property
transactions fell by 5.7% y-on-y.
In a largely anticipated move, the MPC voted unanimously
to increase Bank Rate by 25bps, to 0.75% at their August
meeting. While a rise in interest rates typically exerts
pressure on household finances, we expect the short-term
impact of this move to be limited as rates are still historically
low and a significant proportion of households remain on
fixed-term mortgages. Having said that, household budgets
remain constrained and with Brexit uncertainty abounding,
demand is unlikely to pick-up in the short-term.
Nationwide data showed UK house price growth softened to
2% in the year to June, the smallest increase in five years.
While annual growth bounced back modestly to 2.5% in
July, it is unlikely to move beyond the 2-3% growth range
any time soon. Similarly according to Halifax annual growth
eased to 1.8% in xxxxq2, while ONS data, showed a 3.0%
rise in the year to May, the weakest annual rate in five
years. The RICS survey for July confirms that price
expectations in the short-term remain negative, improving
somewhat in the long-term. We expect house price growth
(on the ONS measure) to land at between 2-3% this year.
Housing market outlook: Summary
House prices on a modest growth path
Tight supply and faltering demand flatten outlook
KEY RISK
The two key risks facing the economy are a
breakdown in Brexit negotiations and the steady rise
of household debt reminiscent of the period prior to
the financialcrisis.
95
115
135
155
175
195
215
235
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Ind
ex, M
arch
20
02
= 1
00
HALIFAX
DCLG
NATIONWIDE
Source: National Statistics, Halifax, Nationwide
22
UK Sample Report
© Experian Economics
Housing market
House price forecasts – UK Regions
Nationwide mortgage payments House price to income ratio
23
0
50000
100000
150000
200000
250000
300000
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2005
2007
2009
2011
2013
2015
2017
2019
2021
£
Rat
io
Source: National Statistics, Experian
House price toearnings ratio
House Prices
30
31
32
33
34
35
36
37
2010
Q2
2011
Q1
2011
Q4
2012
Q3
2013
Q2
2014
Q1
2014
Q4
2015
Q3
2016
Q2
2017
Q1
2017
Q4
Mo
rtga
ge P
aym
ents
as
% o
f In
com
e
Nationwide
Source: Nationwide
-6
-4
-2
0
2
4
6
8
10
12
Nort
h E
ast
Nort
h W
est
York
s &
Hum
be
r
East M
idla
nds
West
Mid
lan
ds
East of
Engla
nd
Gre
ate
r Lo
ndon
Sou
th E
ast
Sou
th W
est
Wale
s
Sco
tlan
d
Nort
her
Ire
land
2011-14 2015 2016 2017-22
% a
nnual
incre
ase
Source: National Statistics, Experian
© Experian Economics
UK August 2018
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
% c
han
ge, q
uar
ter-
on
-qu
arte
r
GDP
Source: National Statistics, Experian
35.0
40.0
45.0
50.0
55.0
60.0
65.0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Ind
ex, 5
0=n
o c
han
ge m
ark
PMI Services
Source: CIPS
GDP growth accelerates to 0.4% in q2The latest figures released by the ONS showed that UK GDP
increased by 0.4% (q-on-q) in xxxxq2. This represents a
1.3% rise compared with the same quarter a year ago.
Only a sector breakdown is available with this first GDP
estimate. This showed that overall growth was driven by a
0.5% rise in services output, largely stemming from
wholesale and retail trade, as well as a recovery in the
construction industry, which experienced a 0.9% increase.
The biggest drag on overall growth came from the production
sector, which contracted by 0.8%, underlined by falls of 0.9%
and 2.7% respectively in manufacturing and energy supply.
While its overall effect was limited, the adverse weather in q1
did have some impact on the economy, particularly in
construction, energy supply and some areas of retail.
Today’s figures show that some of these effects have
unwound in q2 – although it is difficult to quantify their overall
impact. Weather aside, the underlying trend in real GDP
remains one of slowing growth. Comparing the xxxxh1 with
the xxxxh2, the UK economy grew by just 0.6%.
Despite strengthening slightly this quarter, household
consumption remains subdued, suggesting little room for an
uplift in growth in the service industries that form the
backbone of overall expansion. Similarly, subdued business
investment figures indicate that Brexit-related economic and
political uncertainties continue to dampen prospects for the
sector. The modest q2 increase is likely to reflect a bounce
back from a particularly low q1 figure, rather than the
beginning of a sustained recovery. Furthermore, easing
manufacturing export growth diminishes hopes that the
sector could offset weaknesses elsewhere.
With GDP coming in broadly in line with our expectations in
the second quarter, we continue to forecast growth of 1.3%
in the year as a whole.
Services PMI recovered still strong
Growth improves in xxxxh2
Recent trends
24
UK Sample Report
© Experian Economics
Recent trends
Manufacturing output down as overseas demand stays weak Employment growth continues
Retail boom well and truly over House price growth cools
25
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
8
2010
2011
2012
2013
2014
2015
2016
2017
2018
% c
han
ge, 3
mo
nth
s o
n 3
mo
nth
s, y
ear
ago
Source: National Statistics
Manufacturing output
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
2011
2012
2013
2014
2015
2016
2017
2018
% c
han
ge, q
uar
ter-
on
-qu
arte
r
Headcount employment
Source National Statistics
-2
-1
0
1
2
3
4
5
6
7
2010
2011
2012
2013
2014
2015
2016
2017
2018
% c
han
ge, 3
mo
nth
s o
n 3
mo
nth
s, y
ear
ago
Source: National Statistics
Retail sales (%3m-on-3m, yr ago)
-20
-15
-10
-5
0
5
10
15
2010
2011
2012
2013
2014
2015
2016
2017
2018
% c
han
ge, y
ear-
on
-yea
r
Source: Nationwide, Lloyds Banking
Halifax Nationwide
© Experian Economics
UK August 2018
-5
-4
-3
-2
-1
0
1
2
3
4
5
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
% c
han
ge, y
ear-
on
-yea
r
GDP Consumer Spending
Source: National Statistics, Experian
-5
-4
-3
-2
-1
0
1
2
3
4
2004
2006
2008
2010
2012
2014
2016
2018
2020
% c
han
ge, y
ear-
on
-yea
r
GDP
Source: National Statistics, Experian
Uncertain outlook
In January our macro forecasts incorporated the latest ONS
population projections and a modest downgrade to
productivity growth. The overall impact of these changes
compared to last years forecasts was a 0.3% per annum
downgrade to long-term GDP growth, to an average of 1.7%.
This reflects weaker population and productivity growth.
The EU referendum result has created major uncertainties
regarding the medium- and long-term outlook for the UK
economy. Much will depend on the outcome of trade
negotiations and terminating involvement with the EU and
only time will tell how these issues affect economic
performance.
Meanwhile the strong performance of the past four years
means that the UK economy has recovered ground lost
during the xxxx/xx recession more quickly than seemed likely
a few years ago. But the repercussions of the recession and
above all the implications of the Brexit vote are set to hamper
economic progress for a few years. The pace of expansion is
likely to be well below the long-term trend throughout xxxx-xx.
GDP growth is expected to average 1.6% per annum during
that period, against 2.6% from xxxx to xxxx.
The weaker growth outlook reflects in large measure the
expected slowdown in consumer demand, as real incomes
are eroded by higher inflation and earnings growth that
although accelerating, trails its historic average. Fiscal policy
will be easier than in the past six years and the monetary
stance will remain accommodative (even at 0.5% interest
rates are at well below the historic average). This will help
support activity but until the UK’s post Brexit trading
relationships are finalised it is not possible to determine
whether this will be sufficient to avert an outright recession at
some stage in the next few years.
Longer-term outlook
Consumption won’t regain previous buoyancy
26
Subdued GDP growth
UK Sample Report
© Experian Economics
Two-year outlookInvestment remains muted Fiscal austerity squeezes public spending
Exports to outgrow imports next year Job growth to ease
27
-15
-10
-5
0
5
10
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
% c
han
ge, y
ear-
on
-yea
r
Investment
Source: National Statistics, Experian
0
1
1
2
2
3
3
4
4
5
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
% c
han
ge, y
ear-
on
-yea
r
Government Spending
Source: National Statistics, Experian
-15
-10
-5
0
5
10
15
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
% c
han
ge, y
ear-
on
-yea
r
Source: National Statistics, Experian
Exports Imports
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
% c
han
ge, y
ear-
on
-yea
r
Employment
Source: National Statistics, Experian
© Experian Economics
UK August 2018
4
5
6
7
8
9
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Un
emp
loym
ent
rate
, %
ILO Unemployment Rate
Source: National Statisitcs, Experian
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
3
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
% c
ha
nge
, yea
r-o
n-y
ear
Total Employment
Source:National Statisitcs, Experian
Employment gains remain strong
The latest figures from the ONS showed that the labour
market is generally in good health, however both total and
regular pay growth eased.
The key points comparing the three months to June xxxx
with the previous three months are:
• Employment grew by 42,000 to 32.4 million.
• The number of people working full-time increased by
105,000, while the number of part-time workers fell by
64,000
• Unemployment dropped by 65,000 to 1.4 million and the
unemployment rate eased to 4.0%
• The number of people in part-time work, because they
could not find a full-time job, declined by 30,000
• Comparing April-June with a year earlier, pay for
employees in Great Britain increased by 2.7% excluding
bonuses, and 2.4% including bonuses.
Aside from a 77,000 increase in inactivity in the three
months to April-June, the first in almost a year, the latest
data points towards a continuing erosion of slack (available
unemployed resource) in the economy. While the gain in
employment was the smallest since February, the drop in
unemployment was the largest since July last year. The
unemployment rate is the lowest it has been since the winter
of xxxx and the vacancy rate continues to trend up,
increasing by 20,000 in the three months to May – July.
Tight labour market conditions and low unemployment are
typically associated with higher pay increases as it becomes
more difficult for firms to recruit and retain staff. However,
having eased to 2.4% the gains in total pay are now no
greater than they were in xxxx and xxxx. Worryingly the
slowdown was underlined by an easing in private sector pay
to 2.4%. Public sector pay which is less directly tied to labour
market conditions accelerated slightly to 2.2%.
Labour market
Employment growth to slow
Unemployment set to rise marginally
28
UK Sample Report
© Experian Economics
Labour market
Fragile productivity growth Employment rate at historic highs
Real earnings growth struggles Healthy employment gains
29
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
% c
han
ge, y
ear-
on
-yea
r
Labour Productivity
Source: National Statistics, Experian
74.0
74.5
75.0
75.5
76.0
76.5
77.0
77.5
78.0
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
Emp
loym
ent
ate,
%
LFS Employment Rate
Source: National Statistics, Experian
-4
-2
0
2
4
6
8
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
% c
han
ge, y
ear-
on
-yea
r
Source: National Statistics, Experian
Average Earnings
CPI Inflation
Real Average Earnings
20
22
24
26
28
30
32
34
36
38
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
mill
ion
s
Source: National Statistics, Experian
Employee Jobs
Workforce Jobs
© Experian Economics
UK August 2018
Contacts
Mohammed ChaudhriManagingEconomist
T: +44 (0) 207 746 8235
Mohammed joined Experian in April 2014
and leads in producing Experian’s monthly
UK macro forecast and the quarterly
Consumer Credit Report. He is also the
economist responsible for running
economic stress scenarios. Before joining
Experian Mohammed began his career as
a fast-stream economist at Her Majesty’s
Treasury.
James IsonSeniorEconomist
T: +44 (0) 115 828 6002
James joined Experian in August 2013. He
holds an Economics BSc (1st class
honours) from the University of Sheffield,
and an MPhil in Environmental Policy from
the University of Cambridge. His role
within the Economics team focuses largely
on the UK consumer, and he is
responsible for producing disaggregated
income and spending forecasts by
household.
Economics from Experian
Our economic forecasting expertise
Experian's team of 20 economists is a leading provider of global, national,regional and local economic forecasts and analysis to the commercial andpublic sectors. Our foresight helps organisations predict the future of theirmarkets, identify new business opportunities, quantify risk and make informeddecisions.
Experian’s economics team is part of a 140-strong analytics division, whichprovides an understanding of consumers, markets and economies in the UKand around the world, past, present and future. As part of the Experian group,the analytics division has access to a wealth of research data and innovativesoftware solutions. Its statisticians, econometricians, sociologists, geographers,market researchers and economists carry out extensive research into theunderlying drivers of social, economic and marketchange.
For more information, visit experian.co.uk/economics
About Experian
Experian is a global leader in providing information, analytical and marketingservices to organisations and consumers to help manage the risk and rewardof commercial and financial decisions. Combining its unique information toolsand deep understanding of individuals, markets and economies, Experianpartners with organisations around the world to establish and strengthencustomer relationships and provide their businesses with competitiveadvantage. For consumers, Experian delivers critical information that enablesthem to make financial and purchasing decisions with greater control andconfidence. Clients include organisations from financial services, retail andcatalogue, telecommunications, utilities, media, insurance, automotive, leisure,e-commerce,manufacturing, property and government sectors.
Experian plc is listed on the London Stock Exchange (EXPN) and is aconstituent of the FTSE 100 index. Total revenue for the year ended 31 March2014 was $4.8 billion. Experian employs over 16,000 people in 39 countriesand has its corporate headquarters in Dublin, Ireland, with operationalheadquarters in Nottingham, UK; Costa Mesa, California; and São Paulo,Brazil.
For more information, visit experianplc.com
The word 'Experian' is a registered trademark in the EU and other countriesand is owned by Experian plc and/or its associated companies
Copyright © 2018 Experian
Apart fromfair dealing for the purpose of research or private study, or criticismor review, and only as permitted under the Copyright Designs
and Patents Act 1998, thispublication may onlybereproduced,stored or transmitted, inany formor by anymeans, with theprior permission
in writing of the Publishers or in the case of reprographic reproduction in accordance with the terms of the licenses issued by the Copyright
LicensingAgencyintheUK.UScopyrightlawisapplicableintheUSA.
This document is issued by Experian Ltd.While all reasonable care has been taken in preparing this document, noresponsibility or liability is
accepted for errors of fact or for any opinionexpressedherein.Opinions, projectionsand estimates are subject to change without notice.This
document is for information purposes only. It does not constitute any offer, recommendation or solicitation to any person to enter into any
transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction of likely future movements in rates or
prices or any representation that any such future movements will not exceed those shown in any illustration. The contents of this document
are not made with regard to the specific investment objectives, financial situation or the particular needs of any particular person. Any
investments discussed may not be suitable for all investors. Past performance is not necessarily indicative of future performance; the value,
price or income from investments may fall as well as rise. Experian Ltd, and/or a connected company, may have a position in any of the
instruments or currencies mentioned in this document.You are advised to make your own independent judgment with respect to any matter
containedherein.
30
Registered office address:
The Sir John Peace Building
Experian Way
NG2 Business Park
Nottingham
NG80 1ZZ
United Kingdom
experian.co.uk
Experian Ltd is authorized and
regulated by the Financial
Conduct Authority.
Experian Ltd is registered in
England and Wales under
company registration number
653331.
The word “EXPERIAN” and the graphical
device are trade marks of Experian and/or its
associated companies and may be registered
in the EU, USA and other countries. The
graphical device is a registered Community
design in the EU.
All rights reserved. 31