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It has become increasingly clear that the Chancellor’s Budget was not quite as fully-financed as it first appeared. Many of the permanent giveaways were paid for by takeaways which will provide only a temporary source of revenue. Meanwhile, the forecasts …
24th March 2014
February’s public finances figures confirmed that the UK’s budget deficit is continuing to make steady but slow downward progress. But the fiscal consolidation still has a very long way to go. … Public Finances …
21st March 2014
The meagre giveaway to consumers in yesterday’s Budget did little to change the reality that fiscal policy will impart a moderate squeeze on households’ incomes over the next few years. Indeed, the squeeze is set to intensify after the general election …
20th March 2014
This was a fiscally neutral Budget which, from a macro-economic standpoint, changes very little. With the fiscal consolidation set to continue for at least another five years, the responsibility for sustaining the economic recovery will continue to lie …
19th March 2014
Today’s figures showed that the recovery in the labour market is slowing, increasing the chances that the MPC keeps official interest rates on hold until late next year. … Labour Data (Jan./Feb.) & MPC Minutes …
Wednesday’s labour market figures look set to show that the unemployment rate resumed its downward trend at the start of 2014. But they also seem likely to confirm that there is still plenty of spare capacity in the economy that can be used up before …
17th March 2014
The Government’s failure thus far to gain credit for the recovery might point to a sizeable net giveaway in Wednesday’s Budget. But Mr Osborne’s room for manoeuvre is limited and, with a risk that economic sentiment will fall again before next May, he is …
The latest trade figures show that the economic recovery is still struggling to broaden out to include exports. This looks likely to remain the case so long as the euro-zone’s economic recovery remains sluggish. … Trade …
14th March 2014
With not much more than a year until the next general election, the Budget on March 19th is one of the Chancellor’s last chances to boost his party’s re-election prospects. But with the fiscal consolidation still less than half-way through, any giveaways …
12th March 2014
January’s official figures show that a steady recovery in industrial production is still underway, despite the pound’s recent appreciation and the continued weakness of demand in key European export markets. … Industrial Production …
11th March 2014
Although the latest BRC figures suggest that the recovery in retail sales lost some momentum in February, this does little to alter our view that 2014 should be a good year for consumer spending. … BRC Retail Sales Monitor …
There are some signs that the benefits of offshoring may be diminishing. Indeed, a reverse process of ‘onshoring’ could already be in train. But onshoring seems likely to be confined to the manufacturing sector and it is unlikely to provide much of a …
Last week’s news that house prices surged in February will have done little to dispel concerns that record low interest rates are contributing to the emergence of a renewed house price bubble. Nonetheless, there are many reasons to think that there is …
10th March 2014
The MPC’s decision to leave interest rates on hold, marking five years since they reached their record low, is likely to be repeated many more times. With recent news suggesting the MPC’s estimate of spare capacity is too conservative, we think the sixth …
6th March 2014
The squeeze on real earnings is continuing to ease, increasing the chances that 2014 is the first year that real pay rises since the financial crisis. Granted, the headline (three month average of the annual) growth rate of earnings only edged up to 1.1% …
5th March 2014
February’s CIPS/Markit services survey suggested that the economic recovery still has considerable momentum but is not prompting inflationary pressures to build. … CIPS/Markit Report on Services …
The UK economy should not feel any major adverse effects from the crisis in Ukraine since trade and financial exposures to it and Russia are small. The biggest threat is from higher commodity prices, but only a major and sustained rise would cause UK …
4th March 2014
March’s Monetary Policy Committee (MPC) meeting will mark the fifth anniversary of interest rates falling to their record low of 0.5% in 2009. Since the MPC only set out its new guidance last month, this week’s meeting is likely to pass without event. But …
January’s slowing of growth in the broad money supply and lending confirms that the recovery is neither generating inflation nor being fuelled by an unsustainable pick-up in borrowing. … Monetary Indicators Monitor (Feb. …
3rd March 2014
Household borrowing fell back a touch in January, providing further evidence that the recovery is not being fuelled by a consumer borrowing binge. Indeed, credit is still well below pre-crisis levels and a number of market and regulatory forces could …
February’s CIPS manufacturing report confirmed that the sector’s recovery has not been knocked off course by sterling’s appreciation. Meanwhile, although the latest data show mortgage lending is picking up, economy-wide lending remains very weak. … CIPS …
Last week’s GDP figures showing that investment rose sharply in Q4 should ease concerns that the economic recovery is too dependent on an unsustainable consumer spending splurge. And there are several reasons to expect investment to continue to provide a …
February’s GfK/NOP survey showed consumer confidence holding steady at its joint highest level since August 2007. And there is scope for it to rise this year. … GfK/NOP Consumer Confidence …
28th February 2014
The second estimate of Q4 GDP provided further reassurance that the economic recovery is becoming better balanced and is therefore set to last. … GDP: Second Estimate & Expenditure Breakdown (Q4 …
26th February 2014
February’s strong CBI Distributive Trades Survey should sweep away any concerns fostered by January’s fall in the official measure of retail sales volumes that the recovery in retail spending is running out of steam. … CBI Distributive Trades Survey …
25th February 2014
As things stand, sterling’s recent appreciation should not take too much of the wind out of the recovery’s sails. Exporters have already shown some willingness to accept tighter margins in order to support their production. And even if they do raise their …
24th February 2014
Consumer spending still looks set to grow strongly this year. Real incomes should be boosted by a gradual pick-up in pay growth, falling inflation and further increases in employment. And with the housing market recovery likely to continue apace, …
21st February 2014
The sharp monthly drop in retail sales volumes in January is unlikely to herald the start of a consumer spending slowdown. Meanwhile, the fiscal consolidation remains on track despite January’s disappointingly small budget surplus. … Retail Sales & …
The latest labour market data showed that there is still plenty of spare capacity in the job market. Since the minutes of February’s MPC meeting confirmed that the Committee is committed to eliminating most of the slack in the economy before tightening …
19th February 2014
After falling for six years in a row, real pay should finally rise this year, providing a more sustainable foundation for further robust growth in real consumer spending. Rising employment and a continued recovery in the housing market should also boost …
18th February 2014
January’s consumer prices figures showed that inflationary pressures are continuing to ease steadily and so presented another reason to be upbeat about the outlook for GDP growth this year. … Consumer Prices & Producer Prices …
Wednesday’s labour market figures seem likely to indicate that there is still considerable slack in the economy which will keep inflationary pressures subdued for some time to come. Indeed, by our reckoning, the unemployment rate looks likely to have held …
17th February 2014
The Monetary Policy Committee’s decision to drop the unemployment threshold and introduce phase two of forward guidance does not guarantee that interest rates will stay on hold for a long time yet. However, if we are right in expecting inflation to fall …
The revamp of the Bank of England’s forward guidance unveiled in February’s Inflation Report is likely to shift the emphasis back to the benign outlook for inflation and should therefore ensure that monetary policy remains very loose for some considerable …
12th February 2014
January’s BRC sales figures provided further evidence that 2014 got off to a good start for retailers. And, nothwithstanding the erratic nature of the monthly indicators, the outlook for the consumer sector appears bright. … BRC Retail Sales Monitor …
11th February 2014
The likely change to the MPC’s forward guidance alongside next week’s February Inflation Report could result in more changes to the contents of the Report. But the Committee’s inflation forecast should make it clear that monetary policy is on hold for …
10th February 2014
December’s figures on industrial production and trade offered mixed signals on the economy’s attempts at rebalancing. And this so-so picture is unlikely to change anytime soon. … Industrial Production & Trade …
7th February 2014
The MPC’s decision to leave policy on hold today was almost certainly the last to be taken under the unemployment-focused forward guidance adopted just six months ago. But whatever replaces it, interest rates are likely to remain at very low levels for a …
6th February 2014
Provided that low inflation allows monetary policy to remain very loose for some time yet and a further sharp rise in the pound can be avoided, policy should not be major hindrance to the economic recovery. But it’s not likely to be a great a help either. …
5th February 2014
The economic recovery appears to have remained strong at the start of 2014. Although the composite CIPS/Markit activity index weakened again in January, it still points on the basis of past form to robust GDP growth. In addition, confidence amongst firms …
The further deterioration of the CIPS/Markit services survey in January after the slight slowdown in GDP growth in Q4 may raise concerns that the recovery is starting to lose momentum. But there are many reasons to remain optimistic. … CIPS/Markit …
With the unemployment rate likely to fall below 7% soon, February’s MPC meeting will set the scene for the demise of forward guidance, at least in its current form. Comments by MPC members suggest that the next ‘phase’ of guidance will not involve …
3rd February 2014
Although the CIPS/Markit manufacturing survey weakened further in January, it continues to suggest that the industrial sector is enjoying a robust recovery and making a punchy contribution to overall GDP growth. … CIPS/Markit Report on Manufacturing …
Against a positive economic backdrop in recent quarters, one blot on the UK economy’s copybook has been the continuing dismal performance of productivity. Indeed, both output per worker and output per hour are likely to have fallen in Q4. But rising …
January’s GfK/NOP confidence survey suggested that consumers started the year in high spirits. And with real earnings likely to rise this year for the first time since 2007, there is scope for confidence and spending growth to strengthen further. … …
31st January 2014
The broad money supply continues to grow at a rate which should reassure those fearing that the economic recovery might be building up steam too rapidly. Indeed, with bank lending remaining subdued, the financial sector seems more likely to slow the …
30th January 2014
Household borrowing reached its highest level since July 2008 in December. But while credit conditions appear to be easing, rising borrowing costs and possible intervention by the Bank of England could limit borrowing growth further ahead. … Household …
The ongoing decline in real average earnings is often presented as a threat to the recovery. But the flip side of falling real pay has been rising employment. This has supported growth in total real earnings, albeit to the benefit of some retailers more …
29th January 2014
The main political parties have recently been fighting amongst themselves for the mantle of fiscal responsibility. But ambitions on both sides for a budget surplus exaggerate the influence politicians have over the public finances. And this goal could …
This year looks set to be the first since 2004 that the average inflation rate is below the 2% target. And with output still below its potential, a strong recovery is unlikely to generate price pressures. Indeed, by raising productivity, stronger growth …
