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The positive run of economic news continued last week. Meanwhile, the Labour party’s shift in strategy underlines that fiscal consolidation will remain a defining feature beyond the election. … Recovery looking more like the real …
10th June 2013
Mervyn King left his last Monetary Policy Committee meeting with his wish to restart the quantitative easing programme unfulfilled and the Committee still seemingly stuck in a state of limbo ahead of Mark Carney’s arrival. Despite the recent signs of …
6th June 2013
The recovery in new car sales continues to go from strength to strength. But it is still failing to translate into a broader pick-up in consumer spending and we remain sceptical that it will do so soon. … Car sales main beneficiary of looser credit …
Signs that the economic recovery may be taking root are growing. The ONS confirmed that GDP grew by 0.3% in Q1 and May’s CIPS/Markit surveys suggest growth may have accelerated in the second quarter. Admittedly, the news from the labour market has been …
5th June 2013
With a sharp rise in May’s CIPS/Markit report on services joining improvements in the manufacturing and construction surveys, signs that a recovery in the economy may be taking root are becoming more convincing. … CIPS/Markit Report on Services …
The UK economy is at risk of following a path that is, if anything, worse than the ‘lost decades’ Japan experienced from the early 1990s. While the UK possesses some advantages Japan lacked, in some respects it is also more vulnerable to a prolonged …
4th June 2013
Together with last week’s improvement in consumer confidence, May’s stronger growth in the BRC measure of retail sales points to building momentum in the consumer sector. But with employment and earnings growth negative, the risk that this momentum …
June looks like being another month of no change for the Monetary Policy Committee. Although inflationary pressures have eased recently, the role of temporary factors means the Committee is likely to place little weight on this development. Meanwhile, a …
3rd June 2013
May’s CIPS/Markit report on manufacturing provided a tentative indication that the industrial sector’s recession might be drawing to a close. However, disappointing figures on the usage of the Funding for Lending Scheme confirmed that the near-term …
On the face of it, the rise in the GfK/NOP measure of consumer confidence in May brought further evidence that the economy has finally turned a corner. But even if confidence is now on the up, it may be some time before it feeds through into stronger …
The latest money figures suggest that the recovery is still being starved of credit and add to evidence that the Funding for Lending Scheme is having a disappointing impact on lending volumes. … Monetary Indicators Monitor (May …
31st May 2013
April’s household borrowing figures are likely to quell some of the optimism arising from the recent run of better economic news. While the Funding for Lending Scheme has continued to drive down interest rates, growth in borrowing showed only a modest …
May’s strong rise in the level of consumer confidence will raise hopes that the near-term outlook for consumer spending has brightened. But May’s reading was boosted by some temporary factors, and with both employment and earnings contracting, we doubt …
The rise in house prices recorded by the Nationwide in May could further boost the growing sense of optimism regarding the housing market. But the fundamentals are still weak, and we think much of that optimism is misplaced. … Nationwide House Prices …
30th May 2013
The fall in May’s CBI Distributive Trades Survey provides another reason to think that the retail sector has lost momentum in the second quarter. Falling employment and negative pay growth means retailers continue to face an uphill struggle for sales. … …
29th May 2013
April’s sharp fall in CPI inflation led some to quickly conclude that this would be enough on its own to prompt the Monetary Policy Committee (MPC) into action. But a closer look at the figures suggests that much of the drop reflected the timing of …
27th May 2013
The nascent recovery in consumer spending lost pace in the first quarter and there are signs that it has wilted further since. Admittedly, some of the weakness of the latest evidence reflects temporary factors – the surveys have been affected by the …
24th May 2013
Real household spending continued to support overall GDP growth in Q1, seeing its sixth successive quarterly rise. But it was the weakest rate of expansion in 18 months. And given a softer labour market, households may have had to dip into their savings …
23rd May 2013
The second estimate of Q1 GDP confirmed that the economy enjoyed some modest growth at the beginning of 2013. But it was an increase in inventories that drove expansion. Meanwhile, aspirations for ‘rebalancing’ look increasingly forlorn. And the …
While the diplomatic language of today’s IMF press conference suggested that the Fund had backed down from criticising the Chancellor’s fiscal plans, its statement proposed several initiatives to offset the drag on the economy from this year’s £10bn of …
22nd May 2013
Today’s data contained some mixed signals on the strength of the economic recovery, with retail sales slumping but with the public finances making a reasonable start to the year. … Retail Sales & Pub. Fin. (Apr.), MPC Minutes …
April’s drop in inflation has provided some welcome, albeit temporary, relief to households’ budgets. While CPI inflation still looks set to climb in the coming months, we continue to expect it to ease pretty quickly thereafter, thereby alleviating one of …
21st May 2013
In contrast to his usual gloominess at Inflation Report press conferences, Mervyn King bowed out of his final forecasting round on a much chirpier note than usual. But there is still a significant risk that the MPC is too optimistic about how quickly the …
20th May 2013
The rally in financial markets and The Pension Regulator’s more flexible stance has eased some of the immediate pressure on firms to deal with the deficits of their defined benefit pension schemes. Nonetheless, we doubt that these developments brighten …
16th May 2013
The latest Inflation Report indicated that the Monetary Policy Committee (MPC) has become a bit more optimistic on the growth outlook. This, alongside its continued expectation of a further rise in inflation in the near-term, means that the MPC is set to …
15th May 2013
Following recent positive news on the economy, the latest UK labour market data provided something of a reality check. Admittedly, a fall in headline employment and a rise in unemployment disguised some less gloomy developments. But further weakening in …
Tourism is an important but often overlooked source of UK export earnings, with overseas visitors spending over £18bn annually in the UK. Increasing numbers of visitors from fast-growing emerging economies are helping to reduce the tourism industry’s …
14th May 2013
There has been a fair bit of excitement about the renewed signs of life in the economy. We would be wary of getting too absorbed in the ebb and flow of the data. Indeed, it is still hard to see what could drive a sustained upturn in the near-term. …
13th May 2013
Recent Inflation Reports have presented a pretty gloomy picture as far as the prospects for inflation are concerned. But May’s Report, to be published on Wednesday, should break this bad run. … Inflation Report may not impede further …
Following last week’s decent business survey results, March’s trade data provided more good news, with net trade likely to have added modestly to GDP growth in the first quarter. But while key export markets in the euro-zone remain very weak, significant …
10th May 2013
The Monetary Policy Committee’s continued inaction shows it has limited appetite for helping the economy to break out of its current insipid state. Upon his arrival in July, Mark Carney may have his work cut out in persuading the Committee of the merits …
9th May 2013
March’s industrial production figures suggest that the economic recovery gained some momentum towards the end of the first quarter. But there are various reasons to think that this impetus will not be sustained. … Industrial Production …
While we think that we’ve done a pretty good job of forecasting the economy recently, we readily admit that our record of forecasting inflation has left a lot to be desired. Given the apparently weaker link between spare capacity and inflation, we are …
8th May 2013
This year’s earlier Easter was primarily to blame for April’s dip in the BRC measure of retail sales. Nonetheless, underlying sales growth still looks fairly limp … BRC Retail Sales Monitor …
The squeeze on consumers’ real pay will intensify even further over the next few months. Thereafter it should abate, although sub-par rates of spending growth are likely to continue for some time. … The squeeze …
7th May 2013
Mervyn King looks unlikely to get his wish for more asset purchases fulfilled before he leaves at the end of June. Hopes therefore rest on Mr Carney spurring the Committee into action when he arrives in July. … King unlikely to get his way before he …
Rumours that the Government is gearing up to sell its stakes in the nationalised banks have hit the headlines. Some think that even a loss-making sale would support the Government’s chances of re-election. But a sell-off would be no quick fix for either …
6th May 2013
An improvement in April’s CIPS/Markit report on services joined the upticks already seen in the manufacturing and construction surveys in suggesting Q2 has got off to a good start. But even with these positive signs, there is still little indication of …
3rd May 2013
There are some tentative signs that the economy is beginning to turn a corner. With GDP growing by 0.3% on the previous quarter in Q1, the economy comfortably avoided a triple-dip recession. And while this growth depended on an expansion in the services …
2nd May 2013
Companies have been reluctant to spend so far in this recovery. And legislation that is being phased in which requires them to contribute to their employees’ pensions could restrain them further. While to some extent firms can mitigate the hit to their …
1st May 2013
April’s CIPS manufacturing survey offers a glimmer of hope that the sector’s recession might be coming to an end. But stagnation, rather than outright expansion, may be the best that manufacturers can hope for this year. … CIPS/Markit Report on …
The very slight drop in house prices recorded in April points to a housing market holding its ground. While prices in London are likely to see some further gains in coming months, prices for the UK as a whole will struggle to see any increase. … …
The latest money and lending figures contained a few positive signs that the Funding for Lending Scheme (FLS) is having a positive impact on borrowing, including the first rise in lending to SMEs in nearly two years. But overall, the impact of the FLS has …
30th April 2013
March’s household borrowing figures saw a continuation of the modest expansion of credit seen in recent months. But there remains little sign of any move back to the pace of borrowing seen prior to the financial crisis. While the Funding for Lending …
After two consecutive months of declines, mortgage approvals for house purchase staged a partial come back in March. A raft of Government interventions is likely to lead to further marginal increases in mortgage lending over the coming months. … …
April’s slight fall in the level of consumer confidence provides further evidence that the consumer sector won’t see a meaningful recovery this year. With employment falling and real pay contracting, we expect consumer spending will remain in the doldrums …
The fact that the official measure of employment is now above its pre-recession peak, while GDP is still about 2.5% below its former high point, calls into question the reliability of the figures. We believe the GDP figures, although imperfect, are still …
29th April 2013
Last week’s revelation that GDP expanded by 0.3% in Q1 will have brought relief to the Chancellor and was a welcome piece of good news following a long period of generally gloomy economic data. But the economy will struggle to repeat Q1’s performance in …
By posting a better than expected 0.3% quarterly expansion in the first quarter, the UK has comfortably avoided a triple-dip recession. As the Chart shows, the big picture is still one of broad stagnation, but at least the economy is tentatively starting …
25th April 2013
The fall in April’s CBI Distributive Trades Survey provides further reason to think that the pick-up in the consumer sector earlier this year was just temporary. With employment now falling and the squeeze on real pay intensifying, retailers face an …
24th April 2013
