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).
Meanwhile central government spending is just £1.4bn above forecast for the year to date (so basically in line).
November 21, 2025 at 9:53 AM
Meanwhile central government spending is just £1.4bn above forecast for the year to date (so basically in line).
So what is going on? Higher central govt borrowing is partly driven by lower receipts which are £2.8bn below forecast for Apr-Oct (hard to see on the chart, I know!). Cash receipts look better (£1.7bn above fcast) but a stronger-than-expected economy should mean *stronger* receipts than the OBR had.
November 21, 2025 at 9:53 AM
So what is going on? Higher central govt borrowing is partly driven by lower receipts which are £2.8bn below forecast for Apr-Oct (hard to see on the chart, I know!). Cash receipts look better (£1.7bn above fcast) but a stronger-than-expected economy should mean *stronger* receipts than the OBR had.
So borrowing was above the OBR's forecast by £3.1bn in Oct. The chart shows borrowing £9.9bn above fcast for the year to date at £116.8bn- keep in mind, OBR fcast for borrowing for the whole year is £117.7bn. Only £4.2bn is central govt tho, with Local Auth and Pub Corps accounting for the rest.
November 21, 2025 at 9:53 AM
So borrowing was above the OBR's forecast by £3.1bn in Oct. The chart shows borrowing £9.9bn above fcast for the year to date at £116.8bn- keep in mind, OBR fcast for borrowing for the whole year is £117.7bn. Only £4.2bn is central govt tho, with Local Auth and Pub Corps accounting for the rest.
So the inflation outlook feels a bit better this morning with the peak seemingly behind us. If the Chancellor can help with the cost of living at the Budget it should help accelerate the fall and should give room for the BoE to deliver much needed rate cuts.
November 19, 2025 at 8:29 AM
So the inflation outlook feels a bit better this morning with the peak seemingly behind us. If the Chancellor can help with the cost of living at the Budget it should help accelerate the fall and should give room for the BoE to deliver much needed rate cuts.
Finally, underlying inflation pressures look a bit better in this release with services inflation falling further (left chart) and, at a high frequency, this measure (right chart) now looks consistent (if not below) levels consistent with meeting the 2% target in the past.
November 19, 2025 at 8:29 AM
Finally, underlying inflation pressures look a bit better in this release with services inflation falling further (left chart) and, at a high frequency, this measure (right chart) now looks consistent (if not below) levels consistent with meeting the 2% target in the past.
This high cost of essential is still showing up in measures of hardship. Foodbank use is still very high (left chart) and energy-related debts are continuing to rise (right chart).
November 19, 2025 at 8:29 AM
This high cost of essential is still showing up in measures of hardship. Foodbank use is still very high (left chart) and energy-related debts are continuing to rise (right chart).
The combination of high energy prices and rising food costs come against a backdrop of shift higher in the cost of essentials (left chart). This is particularly bad news for the lowest-income families who spend about a third more on such essentials than the highest-income families (right chart).
November 19, 2025 at 8:29 AM
The combination of high energy prices and rising food costs come against a backdrop of shift higher in the cost of essentials (left chart). This is particularly bad news for the lowest-income families who spend about a third more on such essentials than the highest-income families (right chart).
Changes on the month, are all about energy prices. While energy prices were up in October (the Ofgem price cap increased by £35 to £1,755), rises a year ago fell out of the 12-month calculation. Food price inflation picked up again too - rising to 4.9% in Oct (from 4.5% in Sep).
November 19, 2025 at 8:29 AM
Changes on the month, are all about energy prices. While energy prices were up in October (the Ofgem price cap increased by £35 to £1,755), rises a year ago fell out of the 12-month calculation. Food price inflation picked up again too - rising to 4.9% in Oct (from 4.5% in Sep).
UK CPI inflation fell 0.2ppts to 3.6% in October, in line with BoE expectations (but slightly above market consensus of 3.5%). BoE says inflation has peaked and will drift down. This chart reminds you that UK inflation is still higher than elsewhere with administered prices adding 0.4ppts to CPI.
November 19, 2025 at 8:29 AM
UK CPI inflation fell 0.2ppts to 3.6% in October, in line with BoE expectations (but slightly above market consensus of 3.5%). BoE says inflation has peaked and will drift down. This chart reminds you that UK inflation is still higher than elsewhere with administered prices adding 0.4ppts to CPI.
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.