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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 …
2nd February 2012
December’s chunky fall in CPI inflation from 4.8% to 4.2% is likely to be followed by further falls that take inflation to 1% or below by the end of the year. … Inflation squeeze starts to …
1st February 2012
January’s CIPS report on manufacturing added to evidence that the industrial recovery got back on track at the start of this year. Nonetheless, the survey also brought signs that the pick-up in output growth will not last. … CIPS/Markit Report on …
It is still too early to tell whether the latest fall in the Nationwide house price index is confirmation of a renewed downward trend. However, given that the economy is already contracting, unemployment is rising and consumer confidence remains low, it …
With the economy now contracting again and further job losses to come, it was perhaps not surprising that the recovery in mortgage approvals seems to have run out of steam. … Mortgage Lending …
31st January 2012
The continued weakness of broad money and lending growth bolsters the case for the MPC to announce another round of quantitative easing (QE) at February’s meeting. … Monetary Indicators Monitor …
During the financial crisis, many countries cut official interest rates to below the 0.5% level seen in the UK. If they can reach this level elsewhere, we do not see why they cannot do so in the UK. Accordingly, a further cut in Bank rate remains one …
30th January 2012
High inflation, rather than ‘temporary factors’ or the euro-zone debt crisis, seems to have been the key driver of the economy’s shift from stagnation to contraction in the fourth quarter. While at this early stage we would not want to rule out the …
Q4’s UK GDP figures confirmed fears that the economy is already contracting again. We won’t know for sure whether the economy is actually back in recession until we get Q1’s figures. But our bet is that the UK is now back in recession and that the economy …
25th January 2012
A few local hot-spots aside, 2011 was not a great year for UK property markets. But the signs are that 2012 will be worse. Activity will remain weak and both commercial and residential property prices are likely to fall by at least 5%. If events in the …
There are no easy options left for the policymakers – but there are still options. For the MPC, there is not only more QE, but altering the form this takes. For the Government there are plenty of ways to boost both its own investment and that in the …
24th January 2012
December’s public finance figures showed that government borrowing is still coming in comfortably below last year’s totals. But with tomorrow’s GDP figures possibly set to show that the economy is already back in recession, borrowing is likely to be much …
Quantitative easing (QE) is not only helping to reduce gilt yields for the Government, but it is also lowering the amount that the Government is paying out in debt interest and therefore helping to reduce the size of its deficit. This effect is not yet …
A major constraint on economic growth last year – high inflation – now looks set to ease. However, this boost will not prevent household spending from falling again in 2012. Thankfully, near-zero inflation should foster a recovery in spending in 2013, …
23rd January 2012
France is spearheading a drive to push ahead with a “Tobin tax” on financial transactions in Europe, even though the UK has ruled out taking part. If a comprehensive tax were introduced, the potential boost to the UK’s financial services sector as …
The UK’s AAA rating always looked safer than the ratings of those euro-zone countries which have been recently downgraded. The UK might yet be in line for a downgrade at some point. But even then, it is unlikely to lose its safe-haven status. … UK’s …
Consumers finally spent more on the high street before Christmas, perhaps tempted by the bigger price discounts that retailers were offering. … A stronger end to the …
20th January 2012
Although December’s official retail sales figures confirmed that consumers flocked to the high street in the run-up to Christmas, we still think that consumers will find it hard to keep increasing their spending at this rate in the months ahead. … …
The economic and financial effects of a limited break-up of the euro-zone commencing this year could knock some 3% to 4% off the level of UK GDP by the end of 2013. A bigger, more disorderly, break-up could have much more damaging effects. … Just how …
19th January 2012
There are obviously major uncertainties about what form Scottish independence might take if it happens, including what currency Scotland might use and what responsibility for RBS she might take on. But the similarity of the structure and recent …
On balance, there was more to worry about than to cheer in the latest labour market data. While there were perhaps some signs that the deterioration in the labour market is beginning to ease, we expect unemployment to rise much further as the economy …
18th January 2012
Inflation took another step down in December and further chunky falls lie ahead, helped by the recent announcements of gas and electricity price cuts. This clears the way for significantly more asset purchases from the Bank of England. … Consumer Prices …
17th January 2012
While the drop in bond yields in recent months has been a generally welcome development, it does have its disadvantages, as highlighted by last week’s figures on company pension schemes. But last week did at least bring better news about the beleaguered …
16th January 2012
A sharp drop in both input and output price inflation in December had always looked likely, given the sharp rise in prices a year ago. Nonetheless, today’s figures confirmed that disinflationary pressure in the economy is building. … Producer Prices …
13th January 2012
The MPC’s decision to leave policy unchanged today was as expected, given that the last of the £75bn of asset purchases decided upon in October is still being completed. However, next month should see the Committee announce a further round of QE, which we …
12th January 2012
Today’s figures suggested that the industrial sector is heading straight back into recession and will fuel concerns that the overall economy stopped growing in the fourth quarter. … Industrial Production …
November’s trade figures bucked the trend so far this year of a general improvement in the economic data. … Trade (Nov.) …
11th January 2012
The UK data released overnight enjoyed the slightly more upbeat tone seen in the other news on the economy so far this year. … UK BRC Retail Sales Monitor (Dec.) & BCC Survey …
10th January 2012
The MPC looks unlikely to do anything more while the asset purchases which began in October are still underway, especially given the recent slight improvement in the economic data. However, we doubt that the news has been strong enough to stop the MPC …
9th January 2012
The start of the new year has brought the good news that the UK might just about have managed to avoid falling back into recession at the end of 2011. However, we think that it would be premature to conclude that the recovery is back on track. … Is the …
Today’s data from Halifax show that house prices fell in four of the final five months of 2011. With the economy set to re-enter recession and the recent rise in unemployment having much further to run, further price falls in 2012 look more than likely. … …
6th January 2012
The economic recovery appears to have regained some momentum at the very end of last year, with the business surveys improving in December. But the outlook for this year still looks bleak. … Economic gloom lifts a …
5th January 2012
December’s CIPS/Markit report on services echoed the manufacturing and construction surveys already released in suggesting that the recovery regained some momentum at the very end of last year. However, we expect this to be short-lived – not least because …
The boost to the narrow money supply from QE2 is yet to feed through into a more meaningful pickup in the broader monetary aggregates. … Monetary Indicators Monitor …
4th January 2012
3rd January 2012
The improvement in December’s UK CIPS/Markit manufacturing survey got the data flow at the beginning of 2012 off to a relatively good start, but hardly suggested that the industrial recovery is back on track. … CIPS/Markit Report on Manufacturing …
There are a number of reasons to remain optimistic about the outlook for the UK’s external sector. Admittedly, these are likely to be outweighed in the near-term by the knock on effects of the euro-zone recession. But once another tough year or two have …
23rd December 2011
Consumers finally appear to have opened their wallets in the last few days. However, the big picture is that the economy has ended the year on a pretty weak note. The consensus expects an expansion in output of about 0.5% next year, but we anticipate a …
22nd December 2011
The minutes of December’s MPC meeting reiterated the Committee’s view that there is little point in trying to fine-tune policy, but nonetheless suggested that the door remains open to more quantitative easing. … MPC Minutes (Dec.) & Public finances …
21st December 2011
Diplomatic relations between the UK and Europe worsened again last week following suggestions by French officials that the ratings agencies should be turning their attention to the UK rather than France. But while the fiscal and economic indicators in …
19th December 2011
The high street had been weathering the economic slowdown well, but the last few weeks have seen retail spending start to soften. … A soft start to the festive …
15th December 2011
The official retail sales figures confirmed that November was a bad month for retailers and will raise concerns that spending will be soft over the festive period. … Retail Sales …
The new annual regional data suggest that the widely-held view that London’s economy has fared better than other regions of the UK over the last couple of years is unfounded. … Regional Monitor …
14th December 2011
Unemployment is still rising – and would be increasing far more rapidly were it not for large numbers of workers becoming self-employed. We expect unemployment to rise much further as the economy relapses into recession. … Labour Market Data …
This was a neutral, steady-as-she-goes budget, with few implications for the macro-economy. From his speech, the Chancellor came across as wanting to be radical, but the measures failed to live up to the rhetoric. … What should we expect from …
13th December 2011
November’s inflation figures provided further hope that inflation has now passed its peak and could soon fall pretty sharply. Give it a year, and the prospect of deflation could be the prime concern again. … Consumer Prices …
David Cameron’s decision to pull away from Europe has called into question the UK’s entire future in the European Union. But when it comes to the UK’s near-term growth prospects, the debate over whether or not the Prime Minister was right to exercise his …
12th December 2011
The high street has been emitting an unrelenting flow of gloomy news in recent weeks. We are reluctant to conclude just yet that Christmas trading will be a total write-off. Nevertheless, a splurge before Christmas would probably only lead to a very weak …
Given that the £75bn of asset purchases announced in October has not been completed yet, today’s decision by the MPC to leave policy unchanged was unsurprising. However, the Committee has sent some strong signals that further quantitative easing (QE) is …
9th December 2011
8th December 2011
