Ofcourse,fromtheeconomysperspective,amonthortwohereortheredoesntmatterverymuch。

Timingisimportant,however,tothemarketsperceptionofwheretheUKeconomysitsinthecycleandtheconsequenceforratepolicyfurtherout。

ThedeliveryofanAugustcutendorsesthemarketsnew-foundviewthatthefundamentalsoftheUKeconomyhaveshiftedmateriallyoverrecentmonthstotheextentthattheBankofEnglandhasbeenshockedintoaction。

Suchamovewouldlikelyresultinayetmoreaggressiveeasingprofilebeingreflectedinthecurve,withtheBankseenembarkingonarescueoperationtosavetheUKconsumer。

Butaswevebeenstressingoverthepastfewweeks,therehas,inourview,beenanoverreactiontoeconomicnewsflowintheUK,withthegreaterlikelihoodbeingthatthemajorityoftheMPCstillwanttowaitandsee。

Ourcaseisbaseduponthenotionthattheoverallweaknessinconsumptionhasbeendistortedbyasharpdropinspendingondurablegoods。

Consumptionofservicesbythepersonalsectorisstillrunningatrespectableratesofgrowth。

Thecurrentdownturnstillcomparesfavourablywiththemoredramaticsetbacksufferedintheearly1990s。

AsMervynKinghaspointedoutrecently,theresilienceofservicesconsumptionmightsuggestsomecorrectioninspendingondurablesislikelyinthecomingmonths。

Indeed,asrecentretailsalesdatahaveshown,thesteadyriseinhouseholdmortgagegrowthhasonceagainprovidedareliableindicatorofspendingonhouseholdgoods,whichhasbeenonanimprovingtrendsinceMarch。

Ofcourse,wearestillbearishontheUKconsumerforthecomingyearasawhole,asthepressurefromaneasinglabourmarketgetsexacerbatedbytighterfiscalpolicy。

Butforthetimebeingitstillseemstousthatsolidhouseholdincomegrowthwilldeliverasomewhatbetterthanexpectedsecondhalfofthisyearthaniscurrentlypricedintothemarket

ByStevenAndrew,Economist,FC

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