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The household saving ratio (saving as a share of income) has risen back to its long-run average, but we doubt that the adjustment is complete. We think that the rise in saving has further to go and will therefore hold back the consumer recovery even as …
25th June 2012
May’s inflation figures should help to strengthen the case for the minority pushing for more QE. Although core inflation rose from 2.1% to 2.2%, this primarily reflected base effects. Our seasonally-adjusted measure of the monthly change in core prices …
The changeable weather, petrol panic-buying and the Jubilee celebrations have all made consumer spending quite volatile recently. However, the underlying picture remains one of a lacklustre recovery. … Spending remains …
22nd June 2012
May’s strong rise in the official measure of retail sales largely reflected the fading of the temporary factors that depressed spending in April and so should not be interpreted as a sign that consumers have materially loosened their purse strings. … …
21st June 2012
The latest regional figures show that the northern and devolved regions of the UK have begun to bear more of the brunt of the economic slowdown. It seems likely to be only a matter of time before this weakness is reflected in the regional employment …
20th June 2012
June’s MPC minutes left an extension of quantitative easing (QE) within the next month or two looking even more likely. We are sticking with our forecast for another £50bn of gilt purchases at the upcoming July meeting. … MPC Minutes (Jun.) & Labour …
The UK’s current deficit reduction plan offers to some the happy prospect of a smaller public sector in the future. But the fiscal consequences of the UK’s ageing population may frustrate such ambitions. Dealing with pressures to spend more in areas like …
The further fall in inflation in May was a nice surprise given that we and the consensus had expected it to hold broadly steady. We continue to expect inflation to be back below its target before the end of the year. … Consumer Prices …
19th June 2012
The measures announced at Thursday’s Mansion House dinner are a bold attempt to get credit flowing through the economy again. Most crucially, by linking the provision of cheap funds to new lending, they reduce the chances that banks will just sit on any …
18th June 2012
Most households should be benefiting from the fall in inflation, but lower income households should gain the most as food and energy price inflation ease further. … Who is benefiting most from falling …
15th June 2012
April’s trade figures are likely to dampen any positive mood following last night’s policy announcements, with an unexpectedly large widening in the deficit compared to March. … Trade …
UK policymakers last night announced that they are significantly stepping up their efforts to try to cushion the UK economy from the effects of the euro-zone crisis. The measures should help to ease strains in the banking sector, but there are question …
The recent swings in weather conditions and retail sales have brought to the fore the issue of the impact of the weather on consumer spending. There are occasions when the weather can have an impact on overall purchases. But in general, weather effects …
12th June 2012
April’s industrial production figures suggested that the sector is on course to make yet another negative contribution to GDP growth in the second quarter. … Industrial Production …
The UK’s return to recession in the past two quarters has been driven by a fall in stockbuilding. Stockbuilding is an erratic component of GDP and so this weakness might just be temporary. However, if the fall is a sign of firms’ lack of confidence in the …
11th June 2012
In the midst of a generally gloomy economic situation, the last week has seen a string of fairly positive domestic news. But we doubt that May’s resilient picture will last. … One swallow does not a summer …
May’s producer prices figures confirmed that price pressures at the start of the inflation pipeline have begun to fade again, strengthening the case for thinking that CPI inflation is on course to fall eventually to a very low rate. … Producer Prices …
8th June 2012
Lingering upside risks to inflation prompted the Monetary Policy Committee (MPC) to keep its asset purchase programme on hold at today’s meeting, despite the increasing turmoil in the euro-zone. However, we continue to think that more quantitative easing …
7th June 2012
May’s CIPS/Markit report on services suggested that activity in the biggest part of the economy is holding up better than in the industrial sector, making the MPC decision at midday today even more finely balanced. We still think that the Committee could …
The small rise in the Halifax house price index for May seems to be in keeping with other evidence that house prices are stuck in a rut, at least at the national level. … Halifax House Prices …
May’s BRC Retail Sales Monitor supported other evidence suggesting that demand on the high street has recovered following April’s washout. However, there are reasons to think that May’s resilience is unlikely to last. … BRC Retail Sales Monitor …
The debate around fiscal policy has tended to become polarised between advocates of austerity, who argue that any relaxation of deficit reduction would bring down the wrath of markets, and opponents, who see consolidation acting as a significant drag on …
6th June 2012
The threat to the UK from the euro-zone has continued to intensify, with concerns building about the Spanish banking system in recent days. But the UK has so far retained its safe-haven status, with the pound climbing higher and ten year government bond …
The Queen’s Diamond Jubilee celebrations from 2nd to 5th June offer some escape from the recent bad news, and may boost consumer spirits and spending. But the additional bank holiday is likely to weigh heavily on output in June, albeit with the potential …
4th June 2012
The sharp deterioration in May’s CIPS report on manufacturing suggests that the downturn in the industrial sector has intensified and has increased the pressure on the Monetary Policy Committee (MPC) to announce further asset purchases as soon as next …
1st June 2012
The minutes of May’s meeting showed that the decision to pause quantitative easing (QE) was pretty close. And the news since then has strengthened the case for doing more. Our hunch is that the Committee will take more action this month. But even if it …
Today’s data from the Nationwide show that house prices continue to tread water. In terms of the outlook, however, downside risks, such as further falls in GDP, dominate the upside. We continue to expect weaker house price data in the second half of the …
31st May 2012
The surprise pick-up in the GfK measure of consumer confidence in May is consistent with the positive findings from the recent CBI Distributive Trades Survey. The Nationwide house price index released this morning also showed a small rise. But the …
April’s household borrowing figures painted a weak picture, suggesting that lending growth is still too weak to foster a sustainable recovery in consumer spending. … Household Borrowing Monitor …
30th May 2012
With money growth still very weak, we continue to think that another extension of quantitative easing is very close. … Monetary Indicators Monitor …
The Bank of England measure of mortgage approvals for April does nothing to change the picture of a depressed mortgage market. With escalating tensions in the euro-zone likely to curb further the appetites of both borrowers and lenders, it is hard to see …
May’s CBI Distributive Trades Survey suggested that demand on the high street has picked up quite strongly in May, perhaps reflecting a rebound from April’s disappointing, weather driven, results. However, we still expect the consumer recovery to struggle …
29th May 2012
Last week’s figures brought some relief on the inflation front, with core inflation dropping from 2.5% to 2.1%. We would not declare victory over inflation just yet. Nonetheless, with pay growth so low, we continue to expect core inflation to drop to very …
28th May 2012
After a seemingly strong spell around the turn of the year, the recovery in consumer spending is flagging again. Total real spending grew by just 0.1% in the first quarter, as a rise in retail sales was offset by a drop in spending off the high street. …
24th May 2012
Initial hopes that the drop in GDP in Q1 might be revised away have been quickly disappointed, with the 0.2% fall today revised to a bigger 0.3% drop. The figure could yet be revised back up in the future. But given the various factors constraining the …
Although a Greek exit from the euro-zone might indirectly tarnish gilts’ safe-haven status, the economic disruption that it would cause would probably apply additional downward pressure on gilt yields. Furthermore, the prospect of more QE and a bigger …
23rd May 2012
The relatively dovish tone of the minutes of May’s MPC meeting suggested that the door to more quantitative easing (QE) is still open. We continue to expect the asset purchases to be resumed soon. … MPC Minutes (May) & Retail Sales …
Inflation resumed its downward trend in April. The fall gives the MPC a bit more leeway to undertake further quantitative easing to cushion the UK economy from the turmoil in the euro-zone. … Consumer Prices & Public Finances …
22nd May 2012
Mervyn King characterised 2012 as a “zigzag year”. Output will certainly bounce around over the next few quarters, but we expect the underlying trend to be flat to slightly down. … Zigzag year to mask weak underlying …
21st May 2012
The recent fall in household wealth highlights one key way in which consumers are already suffering from the impact of the Greek debt crisis. A sustained recovery in real household spending continues to look unlikely while the euro-zone crisis is …
Differences in foreclosure procedures will be one determinant of when State-level housing markets improve. While the national housing market is in the early stages of a recovery, many of the judicial foreclosure States which are struggling to clear their …
As the Olympic torch arrives in Britain, hopes are building that Greece’s greatest cultural legacy could help to offset some of the adverse impact of its current debt crisis on the UK economy. However, we doubt that the Olympics’ motto “faster, higher, …
17th May 2012
According to the latest figures, differences in regional economic growth rates have begun to narrow. Meanwhile, there are signs that London’s economic recovery is starting to be undermined by emerging weaknesses in the labour and housing markets. … …
16th May 2012
May’s Bank of England Inflation Report struck a gloomy tone, suggesting that sticky inflation is preventing the MPC from doing anything to offset the deterioration in the growth outlook. However, we still expect more quantitative easing later this year, …
Labour market activity is still holding up surprisingly well. But pay growth remains exceptionally weak and we expect the return to recession to weigh on the jobs figures before long. … Labour Market Data …
The recent fall in oil prices should, if maintained, bring petrol prices down by enough to boost consumers’ annual disposable incomes by about 0.2%. However, this will not be enough to stop real pay from continuing to fall throughout the rest of this …
15th May 2012
March’s trade figures showed some improvement, although the external sector still looks likely to have dragged on GDP growth in the first quarter overall. … Trade …
The UK has few direct exposures to Greece. However, if Greece defaults on its debt, and perhaps leaves the euro-zone, the UK would still stand to suffer indirectly from the fallout. … What would a Grexit mean for the …
Rising real pay should kick-start a slow recovery in consumer spending next year. But first further falls in spending could lie ahead. … Recovery in sight, but more pain to come …
14th May 2012
The inflation profile in Wednesday's Inflation Report probably won’t look much different from February’s Report. This would appear to support the consensus expectation that the QE programme is now as big as it is going to get. But with the MPC’s growth …
