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The deterioration in October’s CIPS/Markit report on manufacturing provided more evidence that the industrial sector is struggling and suggested that the rebound in the official measure of manufacturing output in the third quarter was only temporary. … …
1st November 2012
Against the run of positive economic data in recent weeks, October’s decline in consumer confidence was particularly disappointing. Although GfK’s survey was undertaken before the news that the economy had emerged from recession, the likelihood of a rapid …
31st October 2012
September’s relatively positive borrowing numbers provided tentative evidence that the Bank of England’s Funding for Lending Scheme (FLS) is reducing the cost and increasing the availability of credit. But the impact of the FLS on savings rates may be …
30th October 2012
September’s CBI Distributive Trades Survey continued the run of favourable economic data seen in recent weeks. But given that real incomes will soon start to be squeezed by rising utility prices, this may only represent a temporary hiatus. … CBI …
The latest household borrowing indicators seemed to reinforce the positive news from last week’s GDP data. But in the face of continued declines in real pay, a pick-up in borrowing may be a symptom of economic weakness rather than strength. … Household …
29th October 2012
The acceleration in the MPC’s preferred measure of broad money growth supports the picture from the recent GDP figures that there has been an underlying improvement in the economy. This could help to tip the balance towards the Committee leaving policy …
In his speech last week, Bank of England Governor Mervyn King left the door open to more quantitative easing, but appeared to rule out any steps towards more unconventional policy measures, including a so-called helicopter drop of money. … King rules …
Not only did the UK pull out of its double-dip in Q3, but the 1% quarterly rise in GDP was a fair bit better than expected. However, it is hard to tell how much of this was due to temporary factors. And it certainly won’t be plain sailing from here on. …
25th October 2012
The idea of nominal GDP targeting is gaining ground in academic circles as an alternative way for policymakers to boost the struggling economy when interest rates are close to zero. The case for a switch is not clear-cut; the framework would have its pros …
A so-called “helicopter drop” of money is generally seen as the nuclear option which will boost the economy if all else fails. However, it is not necessarily the radical step that it might seem. … Is a helicopter drop the …
24th October 2012
After suffering heavily in the recession, spending in the pubs and restaurants sector is likely to recover even more gradually than overall consumer spending over the next year or two. But within this overall trend, we expect to see a continuation of the …
Today’s CBI Industrial Trends Survey for October and Q4 brought more gloomy news on the state of demand for manufactured goods. Meanwhile, Mervyn King left the door open to more quantitative easing in his speech last night. … CBI Ind. Survey (Oct./Q4) & …
There is a significant chance that the Office for Budget Responsibility judges in the Autumn Statement that the Chancellor is likely to miss his secondary target for debt as a share of GDP to be falling in 2015/16. A look back to when the last Government …
22nd October 2012
The OBR’s argument that the Government’s cuts have not been primarily responsible for the economy’s disappointing performance might give Mr Osborne ammunition to press on with Plan A. But even if the fiscal squeeze is not to blame for the economy’s …
Real consumer spending looks on course to have grown in the third quarter. And following some upward revisions to past spending, it could rise a touch in 2012 as a whole, compared to our previous forecast for a 0.5% fall. Nonetheless, it will struggle to …
19th October 2012
September’s better than expected public finances figures will offer some cheer for the Chancellor. Nevertheless, it still looks like borrowing in 2012/13 will overshoot the OBR’s forecast. The dilemma faced by the Chancellor over the best way to meet his …
September’s rise in the official measure of retail sales volumes suggested that consumers have loosened their purse strings a little. However, the rise partly reflected temporary sources of support. Furthermore, the outlook for spending has darkened over …
18th October 2012
In explaining the UK’s ‘productivity puzzle’ – the conundrum of a dismal GDP performance combined with strong employment growth – one possibility is that the GDP figures are understating the actual level of output. But another potential answer that has …
17th October 2012
October’s MPC minutes showed that the Committee is split over whether to do more quantitative easing (QE) once the current round of asset purchases are completed in the next couple of weeks. … MPC Minutes (Oct.) & Labour Market Data …
Today’s consumer prices figures brought the news that RPI inflation in September – the rate which will be used to uprate business rates next April – was 2.6%. While this will be another chunky rise in rates which will cost retailers about £200m, we expect …
16th October 2012
September’s fall in inflation took it within a whisker of its 2% target. Although this is likely to be the last drop for a while, we still expect the weakness of the economy to pull inflation significantly below 2% further ahead. … Consumer Prices …
At the start of next year, the MPC will have to decide what to do with those gilts purchased in its quantitative easing (QE) programme that are about to mature. We expect the Committee to maintain its current loose stance of policy by re-investing the …
Tomorrow’s inflation figures could show CPI inflation falling below its target for the first time since November 2009. And we still see scope for inflation to fall further over the next year or two. While attention is focussed on the upward pressure on …
15th October 2012
The IMF’s new economic forecasts did not tell us more than we already knew. Arguably more important was the IMF’s indication that there is some scope to ease up on the fiscal squeeze. … IMF gives Chancellor some wiggle …
This week has brought some bad news regarding the outlook for households’ disposable incomes. That said, the renewed rise in food and energy prices should be smaller and more short-lived than the other income shocks households have faced over the past …
12th October 2012
There is currently a widespread view that, despite the economy’s prolonged weakness, spare capacity is limited. This judgement is the key factor driving the scale of fiscal consolidation, as well as bearing on the Bank of England’s assessment of the …
In our latest UK Quarterly Review, we look at the heated issue of the Government’s spending cuts. Are they responsible for killing off the economic recovery as some have claimed? Or are they the “bare-faced deception” that others have called them, with …
10th October 2012
One of the most attention-grabbing aspects of the IMF’s latest World Economic Outlook is its new, bigger estimates of the impact of fiscal consolidations on economic growth. At the very least, this might argue for shifting the composition of the …
9th October 2012
August’s weak industrial production and trade figures indicated that the underlying trend in GDP is flat at best and therefore undermined hopes that the “green shoots” of economic recovery are emerging. … Industrial Production & Trade …
September’s BRC Retail Sales Monitor provided more evidence that consumer spending may be showing some tentative signs of recovery. But whether this is the start of a sustained recovery on the high street rather than merely a temporary hiatus is more …
There is a significant chance that the OBR will judge that the Chancellor is on course to miss at least one of his fiscal rules when it revises its forecasts for the Autumn Statement. Rather than tightening policy further, the most palatable option for Mr …
8th October 2012
In the near-term, we expect food sales to increase their share of overall consumer spending, in both nominal and real terms. Admittedly, the slowdown in food price inflation will bear down on values growth. But it will also alleviate the pressure on …
Last week’s CIPS activity surveys, along with the BCC’s latest quarterly survey of the UK economy, means we now have a full set of survey evidence for the third quarter of 2012. Unfortunately, the picture emerging isn’t particularly bright. In fact, …
The MPC’s decision to leave policy on hold today was predictable given the absence of any major economic surprises in recent weeks. We still expect more asset purchases to be announced in November. There is a fair chance that the Committee will cut …
4th October 2012
The latest leading labour market indicators suggest that the recent recovery in private sector employment is likely to run out of steam soon. So, with job cuts continuing in the public sector, it seems as if overall employment might be near a peak. … …
3rd October 2012
The widening of the current account deficit to a record 5.4% of GDP in the second quarter put paid to any hopes of a rebalancing in the economy. The deterioration mainly reflected a deficit on the UK’s investment income balance, a sharp turn-around from …
September’s CIPS/Markit report on services was consistent with the message from the other activity surveys released earlier this week, namely of an economy which is struggling to grow. While some softening in activity in September was always possible …
The latest household borrowing indicators are similar in tone to last week’s national accounts in suggesting that weak borrowing growth is holding back any recovery in consumer spending. … Household Borrowing Monitor …
1st October 2012
On the face of it, the pick-up in the MPC’s preferred measure of broad money growth supports the Committee’s view that its asset purchases are still having a significant impact on the economy. But bank lending growth remains extremely weak and it is still …
Today’s economic data presented a uniformly weak picture of economic activity and will therefore go some way to dampening hopes that the “green shoots” of recovery are emerging. … CIPS Report on Manuf. (Sep.) & Mortgage Approvals …
The Government’s new pensions auto-enrolment scheme gets underway today. In its initial stages, the new contributions that some workers will start to pay will probably have only a modest effect on overall household saving. Nonetheless, this is just one of …
While last week brought some tentatively positive signs regarding bank lending, the news that the UK ran a record current account deficit in Q2, thanks to an investment income deficit, was less encouraging. While the pound’s recent rise and the euro-zone …
Consumer sentiment continues to be very depressed. Admittedly, the small rise in confidence in September is consistent with the pick-up in other economic indicators in recent weeks. But the underlying performance of the economy remains weak and offers …
28th September 2012
Today figures showing that household incomes grew strongly in the second quarter were a rare snippet of good news. But the figures also revealed that consumers remain more focused on repairing their balance sheets than increasing their spending. … Rare …
27th September 2012
The slight upward revision to GDP in Q2 did not alter the big picture that output is still over 4% below its pre-recession peak. We continue to expect GDP to contract by 0.5% this year and expect only a sluggish recovery thereafter. … National Accounts & …
Last week, methodological reforms to correct long-standing deficiencies in the RPI, RPIX and CPI inflation measures became a step closer to being implemented. These reforms look set to have a big impact on the government, investors and consumers, and may …
26th September 2012
September’s CBI Distributive Trades Survey suggested that sales growth may have picked up slightly. While this is consistent with some of the other tentative signs of “green shoots” in the last few weeks, we wouldn’t read too much into it. … CBI …
The Bank of England’s latest Credit Conditions Survey suggested that lenders expect the Funding for Lending Scheme (FLS) to boost the availability of credit to households. However, the picture regarding corporate lending was less positive. … Credit …
The positive tone of most of the recent releases concerning economic activity have led some to argue that the “green shoots” of recovery have re-emerged. But, without wishing to downplay the improvement, we fear that there are at least three warning signs …
24th September 2012
August’s poor public finances figures have further increased the chances that the deficit will significantly exceed the level specified in the fiscal plans. … Public finances (Aug. …
21st September 2012
