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February’s public finance figures got Budget Day off to a bad start for the Chancellor, while the minutes of March’s MPC meeting showed that the door to more quantitative easing is still ajar. … Public finances (Feb.) & MPC minutes …
21st March 2012
The recent rise in oil prices did not stop inflation from taking another step down in February. Admittedly, progress has slowed a bit and inflation could even rise in March. But we still expect it to fall below its target by the end of the year. … …
20th March 2012
The recent rise in gilt yields has mainly reflected a pick-up in interest rate expectations and the growing belief that the MPC will soon be done with QE, rather than growing concerns about the health of the public finances ahead of this week’s Budget. … …
19th March 2012
Today’s Bank of England figures showed that UK banks further reduced their exposures to European countries in the final quarter of last year. Nonetheless, the euro-zone debt crisis continues to pose a serious threat to the UK financial system. … UK …
16th March 2012
Droughts across the UK and some of Western Europe are threatening to push up food prices. Along with the recent rise in energy prices, this might prevent CPI inflation from falling as sharply as hoped this year. But as things stand, it should not stop …
15th March 2012
The latest regional figures suggest that the economic recovery remains weakest of all in Northern Ireland, but has continued to gather momentum the most in the West Midlands. Meanwhile, although the employment outlook appears to be brightening in London, …
14th March 2012
Reports that the Chancellor is considering issuing bonds of 100 years or more in order to take advantage of the government’s low borrowing costs underline the UK’s perceived safe-haven status relative to most other highly indebted countries. … 100 year …
Today’s labour market figures painted a pretty weak picture, with unemployment rising further and pay growth weakening sharply. … Labour Market Data …
Although the UK trade deficit widened in January, the big picture is that the external sector is still holding up quite well given the euro-zone debt crisis. But with the euro-zone economy sliding into recession, we doubt that this will last. … Trade …
13th March 2012
The Chancellor’s resolve to stick to his austerity plans appears to be as strong as ever. We expect another fiscally neutral Budget, with flagship measures such as another rise in the personal tax allowance paid for by a further squeeze on the rich. … …
12th March 2012
Last week marked the third anniversary of official interest rates at just 0.5%. And while there are bound to be both winners and losers, it seems as if no-one is happy about it! … Savers’ plight won’t move the …
Today’s disappointing industrial figures provided further evidence to suggest that the manufacturing recovery may already be starting to lose steam. … UK Ind. Production (Jan.) & Producer Prices …
9th March 2012
Reports that the Chancellor is considering issuing bonds of 100 years or more in order to take advantage of the government’s low borrowing costs underline the UK’s perceived safe-haven status relative to most other highly indebted countries. … Consensus …
8th March 2012
Tomorrow’s MPC meeting marks the third anniversary of interest rates reaching a record low of just 0.5% in March 2009. We think that they could stay at this level for another three years. … 0.5% rates - 3 years down, another 3 to …
7th March 2012
The recent rise in oil prices has sparked fears that CPI inflation will not fall as fast as hoped. However, the focus on oil prices ignores the fact that other commodity prices have risen by less, if at all. … Focus on oil prices neglects wider …
6th March 2012
On its own, the latest dip in house prices is nothing to be too concerned about. But with mortgage interest rates edging up again and unemployment still rising, the downward trend in prices is likely to become entrenched this year. … Halifax House …
Having only just extended its quantitative easing programme by £50bn at last month’s meeting, the MPC is very unlikely to do anything at this week’s meeting. What’s more, comments by Committee members over the last month suggest that they are cooling on …
5th March 2012
February’s CIPS/Markit report on services echoed the manufacturing survey released last week in suggesting that the recent pick-up in economic activity has already started to fade. … CIPS/Markit Report on Services …
Mervyn King faced tough questioning by the Treasury Committee last week on a couple of issues - and fought back hard. The Governor strongly resisted suggestions that the Bank of England should follow the ECB in conducting its own long-term refinancing …
The rise in energy prices adds to the reasons to be cautious about assuming that the recent pick-up in the economic recovery will continue. … Rise in oil prices presents new threat to …
1st March 2012
February’s CIPS report on manufacturing tentatively suggested that the industrial recovery might be starting to falter. Nonetheless, the industrial sector will probably still support overall GDP growth in the first quarter. … CIPS/Markit Report on …
Following falls in December and January, the modest rise in the Nationwide house price index in February is symptomatic of a market that is still struggling for direction. Given that prices are still at historically high levels relative to incomes, a …
The broad money supply bounced back in January, suggesting that the extreme weakness at the end of last year was just temporary. But the underlying trend still looks too weak to support a sustained economic recovery. … Monetary Indicators Monitor …
29th February 2012
The ECB’s second long-term refinancing operation (LTRO) conducted this morning should alleviate the risk of a renewed credit crunch, not just in the euro-zone, but in the UK too. However, UK bank funding markets still look strained and we continue to …
Mortgage approvals are being driven higher by the looming end of the first-time buyer stamp duty holiday and are likely to fall back sharply come April. Thereafter, rising unemployment and falling consumer confidence will conspire to keep mortgage …
Since the financial crisis began, the UK has been the worst performer of all the major advanced economies. And the factors that explain the underperformance, together with new shocks that look set to hit the economy, suggest that the UK will continue to …
28th February 2012
The rise in consumer spending in the final quarter of last year added to other evidence that the consumer recovery is gaining momentum. Falling inflation should continue to alleviate the squeeze on real incomes, but we would be wary of concluding that …
27th February 2012
As soon as last week’s figures showed that public sector borrowing is likely to undershoot the OBR’s forecast this year, the Chancellor was inundated with calls for what he should do with this windfall. However, the Chancellor is unlikely to respond with …
The second estimate of Q4 GDP confirmed that the economy finished 2011 on a weak footing. Admittedly, the drop reflected a temporary dip in the pace of stockbuilding by firms. There are signs too that growth has picked up at the start of this year. …
24th February 2012
Today’s data from the FSA showed that banks are picking up the pace at which they are compensating consumers for mis-sold Payment Protection Insurance (PPI). While the compensation will provide a welcome boost to some individual households’ finances, we …
22nd February 2012
The minutes of February’s MPC meeting were slightly more dovish than last week’s Inflation Report , leaving a further extension of quantitative easing (QE) looking a bit more likely than before. … MPC Minutes …
January’s public finance figures showed that government borrowing remains on track to undershoot the OBR’s forecast for this year, meaning that at next month’s Budget, the Chancellor is likely to claim that Plan A is still working. … Public Finances …
21st February 2012
Mervyn King’s forecast of a “zig-zag” year grabbed the headlines after last week’s Inflation Report, with the Governor warning that June’s extra bank holiday would lead to a bumpy path for output this year. But the big picture is that the MPC still …
20th February 2012
There have been some signs of a pick-up in consumer spending. But some measures are more upbeat than others. And more generally, consumers are still facing a set of tough conditions. … Falling inflation offers some …
17th February 2012
On the face of it, January’s official retail sales figures suggest that a recovery in high street spending is gaining momentum. But there are reasons to doubt the strength of the official data. In any case, the consumer spending outlook remains bleak. … …
Most of the UK regions shared in the improvement in output growth suggested by the national and global activity surveys in January. But labour and housing markets in the North are continuing to fare much worse than those in the South. … Regional Monitor …
16th February 2012
The recent rise in oil prices has sparked fears that CPI inflation will not fall as fast as hoped. However, the focus on oil prices ignores the fact that other commodity prices have risen by less, if at all. … Euro-zone recession to hit UK exports …
15th February 2012
On the face of it, February’s Bank of England Inflation Report suggested that the MPC is unlikely to extend its asset purchase programme much further. But we think that inflation will fall further than the MPC expects, necessitating further stimulus. … …
The labour market data continue to paint a bit of a mixed picture, but the key point is that unemployment is still rising and is likely to increase much further in response to the sluggish economic recovery. … Labour Market Data …
14th February 2012
January’s drop in inflation took it another step closer to the sub-2% rates that we expect to see by the end of the year. Indeed, this time next year, Mervyn King could be getting his pen out to write a letter to explain why inflation is more than 1% …
The squeeze on real pay is finally easing. Unfortunately, this is unlikely to prevent a further drop in real consumer spending this year. However, it should lay the foundation for a recovery to start in 2013. … Squeeze on real pay to ease this …
13th February 2012
The major UK banks have more or less met the Project Merlin lending targets set by the Government. But these targets were fairly meaningless in the first place and there are plenty of reasons to expect credit growth to remain a constraint on the economic …
Some interpreted the Committee’s decision to increase QE by “only” £50bn last week as a sign that it is close to thinking that it has done enough. However, we think that next week’s Inflation Report will leave the door open to further asset purchases. … …
Stronger monthly rises in both input and output prices in January did not prevent further falls in the annual inflation rates. And while February may see another sharp monthly rise in input prices, underlying inflationary pressures in the industrial …
10th February 2012
The MPC’s decision to increase its asset purchase programme by another £50bn was as expected and confirmed that the recent improvement in the economic data has not alleviated the need for policymakers to give further support to the economy. We still think …
9th February 2012
On the face of it, December’s industrial production and trade figures added to the recent run of stronger data on the UK economy. But a closer look at the numbers suggests that the improvement is unlikely to be maintained in the months ahead. … …
November’s Inflation Report forecasts suggested that significantly more QE is needed and we don’t think that the recent improvement in the economic data has significantly altered that picture. … Better data have not alleviated the need for more …
6th February 2012
Last week’s Bank of England figures showed that bank lending to firms and households fell in December, while conditions in bank funding markets have continued to get worse. In contrast, LIBOR spreads in the euro-zone have been narrowing – suggesting that …
The improvement in January’s CIPS/Markit report on services provided further evidence that the economic recovery is getting back on track after Q4’s contraction in GDP. … CIPS/Markit Report on Services …
3rd February 2012
