Barclays has developed a heat map analysis comparing current UK economic indicators to past energy shocks. The bank suggests second-round effects from the ongoing energy price shock will more closely resemble the 2011 scenario than 2022.
The bank notes that the economic backdrop of the current energy price shock will influence how it spreads and persists. In 2011, second-round effects were limited, while 2022 saw more persistent inflationary impact.
Barclays adapted recent work by the European Central Bank for the UK market, creating a new framework. The analysis presents key economic measures of supply and demand conditions that will affect inflation.
The bank standardized each measure using z-scores. Green indicates above-average conditions, blue shows below-average. Some series are inverted so that green signals a positive directional effect on inflation and persistence, while blue shows the opposite.
