Omicron impact should be fleeting for United Kingdom
The hit to UK GDP from Omicron is likely to be much smaller than previous Covid waves and the economy will bounce back quickly after a 0.6% m/m drop in December. While economically meaningful restrictions were few, activity fell due to voluntary social distancing and the disruption to labour supply from large numbers of workers isolating.
What you will learn:
- Output is likely to remain subdued in January but should then rebound rapidly as the Omicron wave ebbs. Still, our new forecast estimates GDP growing by just 4.4% in 2022, down from 5.7% two months ago.
- Nevertheless, a number of high-frequency sources report a marked drop in social consumption activity in December. Most notably, CHAPS data showed a 20ppt decline in debit and credit card spending on social activities during the month.
- Given the relative lack of meaningful restrictions, we attribute the slump in activity to two factors. First, some consumers have adopted a more cautious approach to social consumption given the greater transmissibility of Omicron. Second, the sheer number of cases means large numbers of people were forced to isolate.
Housing supply front and centre for policy makers
The passing of the previously delayed Housing Australia Future Fund (HAFF) means that all the Albanese government's announced housing policies are now in place. These policies represent a minimum funding pool of $5.5 billion stretching to the end of the decade, potentially lifting as high as $10 billion if all targets are met and excess fund returns achieved.Find Out More
BoJ will continue effective zero interest rate policy anyway in Japan
The Bank of Japan (BoJ) maintained the policy rates at its September meeting, following a tweak in its yield curve control policy in July. Although this decision was widely expected, the markets are starting to speculate policy changes within the coming quarters, especially after the BoJ governor's recent interview.Find Out More