United Kingdom | Downside risks from Omicron appear to be fading

Though the scale of December’s fall in retail sales came as a nasty surprise, it was not simply an Omicron story. We still think the Omicron hit to GDP will be small and short-lived, with the fall in case numbers and evidence of firming social consumption activity in the high-frequency data supporting this view.

What you will learn:

With downside risks from Omicron fading, February’s MPC meeting is live.
Andrew Bailey’s comments on the tightness of the labour market were certainly hawkish, and the outcome of February’s meeting looks like a coin toss.
But we remain sceptical that the data will support more than two 25bp hikes in 2022.

Topics: United Kingdom, Europe, Workforce, Economic outlook, Retail, Demographics, GDP, Pandemic, Covid19, Outlook, Covid restrictions, Omicron