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The OBR’s downgraded forecasts for economic growth still look too high, suggesting that borrowing will be slower to fall than it expects. And even if the OBR’s forecasts are right, the Chancellor still faces more tough decisions next year when he needs to …
10th December 2012
The further drop in industrial production in October to its lowest level in two decades raises the chances of a triple dip recession in the wider economy. … Industrial Prod. (Oct.) & Inflation Attitudes Survey …
7th December 2012
In order to fund corporate tax cuts and an infrastructure boost, yesterday’s Autumn Statement heaped more pain on consumers. Indeed, by announcing more benefit cuts for 2013 and 2014, and confirming that welfare spending will bear the brunt in the next …
6th December 2012
Although the MPC left its quantitative easing (QE) programme on pause again at today’s meeting, we think that more asset purchases are likely before long. And yesterday’s gloomy Autumn Statement, showing that the austerity drive will now extend to 2018, …
Following last week’s generally disappointing activity surveys, October’s trade data provided another indication that the economy has got off to a weak start to Q4. … Trade …
There were few surprises in this Autumn Statement, which simply represented a continuation of the existing strategy. The Statement will do little to get the economy out of its current malaise and a triple-dip remains a real threat. … Autumn Statement …
5th December 2012
The further deterioration in the CIPS/Markit report on services suggested that the recovery in the biggest part of the economy has completely fizzled out. A renewed contraction in GDP is looking increasingly likely in the final quarter of the year. … …
Following the strong rise in GDP in the third quarter, the more recent news has been disappointing. … Activity relapses in Q4 …
4th December 2012
November’s BRC Retail Sales Monitor supported other evidence suggesting that the start of last month saw strong retail sales growth. But with that growth petering out over the rest of November, underlying growth still looks weak. … BRC Retail Sales …
Although the Monetary Policy Committee (MPC) voted to halt its quantitative easing (QE) programme in November, it has since turned out that policy is just being loosened in another way, namely via the Chancellor’s raid on the QE fund. And the MPC has …
3rd December 2012
The small improvement in the UK CIPS/Markit manufacturing survey in November did little to change the fundamental picture of a struggling industrial sector. Meanwhile, the first data on the usage of the Funding for Lending Scheme showed that banks …
Attention has quickly turned to what impact Mark Carney’s appointment as Governor of the Bank of England is likely to have on monetary policy. We are not convinced by arguments that he has demonstrated either a hawkish or a dovish bias at the Bank of …
November’s surprise pick-up in consumer confidence supported yesterday’s CBI Distributive Trades survey in suggesting that consumers have perked up a bit. But the foundations for a sustained improvement in consumer spirits are lacking. … GfK/NOP …
30th November 2012
November’s CBI Distributive Trades Survey suggests that the festive period has got off to a good start on the high street. But with pay growth likely to remain weak and unemployment set to rise, retailers shouldn’t necessarily put out the bunting yet. … …
29th November 2012
Household borrowing growth remains pretty weak, although there are tentative signs that the Bank of England’s Funding for Lending Scheme (FLS) is starting to have a positive impact. … Household Borrowing Monitor …
The broad money supply is continuing to grow at a decent pace. But there are question marks over whether that will last now that the MPC has paused its quantitative easing (QE) programme and whether firms and households will spend their higher money …
Mortgage approvals are continuing to rise, helped by a further marginal fall in mortgage rates. But they remain far too low to kick-start a sustained recovery in house prices. … Nationwide House Prices (Nov. 12) & Mortgage Lending (Oct. …
The Bank of England continues to argue that inflation is being kept high by a series of one-off factors. Many of the “idiosyncratic” factors boosting inflation at the moment may prove to be more than temporary. Even so, a case could be made for the MPC …
28th November 2012
While real household spending posted a decent rise in the third quarter, at least half of the increase was due to the Olympics. And with the fourth quarter shaping up to be weak, a sustained recovery in spending looks unlikely until next year. … A …
27th November 2012
GDP is still estimated to have risen by a solid 1% in Q3, but this primarily reflected temporary factors. Evidence is building that activity in Q4 has relapsed. … GDP: Second Estimate & Expenditure Breakdown …
Bank of Canada Governor Mark Carney is well-qualified to manage the Bank of England’s expanded role when he takes over from Mervyn King as Governor of the Bank of England at the end of next June. Nonetheless, he faces new and big challenges ahead. … …
26th November 2012
October’s public finance data suggest that the fiscal position remains weak, with the main problem being on the receipts side. Along with rising inflation, downbeat business surveys and recent signs of a softening in the labour market, the latest data on …
A recovery in discretionary spending is in prospect. While tight credit conditions will impede any upturn in outlays on big-ticket items, we think electrical goods, food and clothing should do relatively well. Meanwhile, the fiscal squeeze will hit lower …
23rd November 2012
The Chancellor remains hemmed in by the fiscal position. Indeed, he may well have to choose between introducing even more austerity in the Autumn Statement and letting at least one of his fiscal rules slide. … Autumn Statement 2012 …
22nd November 2012
It should not be long until we hear who will replace Sir Mervyn King as Governor of the Bank of England at the end of next June. It is thought that the appointment of a Bank “insider” might just lead to a continuation of the status quo. But the difficult …
21st November 2012
October’s public finance figures – the last before the Autumn Statement in a fortnight’s time – suggested that there is still a significant risk that the Chancellor will break his fiscal rules unless he introduces even more austerity. Meanwhile, the …
After enduring a series of cost shocks in recent years alongside stagnant consumer demand, retailers could be forgiven for thinking that the squeeze on their profits will never cease. Nonetheless, the outlook for costs is brighter now than it has been for …
20th November 2012
The main message from Wednesday’s Inflation Report was that quantitative easing (QE) is still the MPC’s preferred course of action when it comes to giving the economy more stimulus. … QE still at the top of the …
19th November 2012
October’s poor retail sales figures have prompted fears of a disappointing Christmas on the high street. While we doubt that it will be a write-off, we expect consumers to be cautious and retailers might end up having to step up the pace of discounting. … …
16th November 2012
Although real consumer spending probably rose in the third quarter, that could be as good as it gets for a while. … Real pay prospects …
There is at last light at the end of the tunnel for consumer demand. But while we expect some sort of recovery in consumer spending to get going relatively soon, we expect that recovery to be very sluggish. … Is consumer spending facing a lost …
15th November 2012
October’s official retail sales figures support the timelier surveys in suggesting that the recovery on the high street is losing momentum ahead of the crucial Christmas shopping season. … Retail Sales (Oct. …
Although the Bank of England’s latest Inflation Report showed inflation projected to be broadly at its 2% target at the two year policy horizon, Mervyn King’s comments at the press conference suggested that the door remains wide open to more quantitative …
14th November 2012
The latest labour market figures revealed that while employment has continued to grow, the pace of expansion is slowing. And timelier indicators suggest that the labour market’s recent resilience may finally be starting to fade. … Labour Market Data …
October’s rise in CPI inflation from 2.2% to 2.7% provided another explanation for why the Monetary Policy Committee (MPC), which would have seen the headline figures, held back from providing more stimulus last week. However, the rise in inflation is not …
13th November 2012
Some members of the MPC appear to think that they are reaching the limits of how much monetary policy can help the economy. We agree that more gilt purchases might not do a lot of good. But this just means that the Committee should get more imaginative. … …
12th November 2012
The Prime Minister may have been getting ahead of himself when he said a few weeks ago that “the good news will keep on coming”. Although Q3’s GDP figure was strong, the more recent official and survey data have been disappointing. … The shine wears …
The Government today agreed with the Bank of England to transfer to the Exchequer the excess cash held in the Bank’s quantitative easing (QE) facility. This will leave the published borrowing figures looking healthier in the near-term, but is largely just …
9th November 2012
The trade deficit narrowed in September, but the balance has recently been volatile and the underlying picture is one of little improvement. However, there were more encouraging signs in today’s mortgage interest rates data that the Funding for Lending …
The European Commission this week added to warnings that the Chancellor might miss his target for debt as a share of GDP to be falling in 2015/16. One factor influencing whether Mr Osborne decides just to break the rule is how the rating agencies would …
8th November 2012
The MPC’s decision to leave policy on hold today would not have been an easy one and the vote could have been quite close. We think that more policy stimulus will be required in the coming months – the question is whether the Committee feels it has the …
About 1 million households are currently receiving a letter from HMRC setting out how much they will lose from child benefit reforms taking effect in January 2013. While the macroeconomic impact of these reforms will be modest, the overall spending and …
7th November 2012
September’s industrial production figures supported the latest CIPS/Markit activity surveys in suggesting that the economic recovery is quickly losing momentum again. … Industrial Production …
6th November 2012
October’s BRC Retail Sales Monitor provided evidence that, following Q3’s generally positive news from the high street, a retail recovery seems to be fizzling out. … BRC Retail Sales Monitor …
The squeeze on real pay is ending but the prospect of an actual recovery now looks a bit further off. We still expect the consumer spending recovery to be very muted. … Recovery remains just out of …
5th November 2012
UK banks have now increased their provisions for compensation payments for mis-sold Payment Protection Insurance (PPI) policies to £15bn – equal to 1.5% of annual household incomes. However, we think that the boost to household spending from these payouts …
It will be a close decision at this week’s Monetary Policy Committee meeting. The latest business surveys suggest that the recovery is still struggling. But other economic data have been more positive, while inflation is likely to pick up again in the …
October’s CIPS/Markit report on services was something of a reality check to the generally positive economic news of recent weeks. Alongside last week’s disappointing manufacturing survey, it suggests that the economy is continuing to splutter. The MPC’s …
Last week brought some tentative signs that the Funding for Lending Scheme (FLS) is beginning to work. New mortgage rates have been falling and last week’s lending figures were pretty encouraging. However, the improvement remains restricted to the …
The last month has seen some tentatively encouraging news about the economy. But the good news might not last for long; the economy could contract in the last quarter of the year. … Green shoots tentatively …
1st November 2012
