DAVY VIEW

A busy week of UK economy news culminated in this morning’s retail sales result for August, which showed a reversal of July’s headline decline. While the UK economy could outperform expectations this year, the bigger picture remains that output has been operating below potential for many years. The Bank of England’s (BoE) split decision to keep Bank Rate at 3.75% could set the stage for a hike in November, but this is not a done deal owing to the weak UK labour market and the related continued absence of second-round effects of higher energy prices so far this year.