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The downgrade of US sovereign debt and speculation that France might be next has prompted renewed questions over the UK’s own credit standing. While a UK downgrade is not an imminent threat, it is certainly a possibility further ahead if, as we expect, …
16th August 2011
The recent fall in UK equities seems a bit overdone relative to the news on the domestic economy. Nonetheless, UK equities may continue to struggle if risks build in the global financial system. … Bounce in UK equities unlikely to …
11th August 2011
July’s consumer prices figures confirmed that June’s surprise drop in CPI inflation was just a blip. But the fact that the rise last month was driven by a pick-up in the core rate does not mean that inflation will be slow to fall next year. … Bank of …
The further falls in the markets earlier this morning were followed by yet more disappointing news on the UK’s economic recovery. The recovery was already struggling, but the recent market mayhem has increased the risks that the economy actual relapses …
10th August 2011
The possible adverse effects of the recent sharp fall in equity prices on confidence and consumers’ wealth have increased the risks that the economy starts to contract again. While our central expectation is for the economy to keep growing in the quarters …
9th August 2011
The mayhem in the markets last week has set a gloomy backdrop for the Bank of England’s Inflation Report published this week. … Market mayhem sets gloomy backdrop for Inflation …
The latest batch of producer prices figures showed that cost pressures are finally close to peaking in the industrial sector. … Producer Prices …
6th August 2011
The latest rise in house prices in July will be seen by some as a sign that the market has found a new equilibrium. However, increasingly downbeat news regarding the wider economy and the fact that house prices are still at historically high levels, mean …
The MPC’s decision to re-launch its quantitative easing programme today confirms that the Committee finally recognises that the major threat to the UK is renewed recession, not inflation. But previous experience suggests that the positive impact on the …
5th August 2011
The improvement in July’s UK CIPS/Markit report on services came as a bit of a relief after the recent run of poor data on the economy and suggested that the services sector is holding up better than the industrial sector. However, the big picture is that …
4th August 2011
After the disappointing second quarter, there are few signs that the recovery has since got back on track. … Recovery still struggling …
With the economic recovery still struggling to regain momentum, we have recently lowered our forecasts for consumer spending and GDP growth this year. We now expect a 1.5% drop in real spending. We still expect spending to drop further next year. … …
3rd August 2011
Gilt yields have fallen sharply since February, with 10-year yields now equal to the 50-year or so low of 2.75% that they reached in March 2009. But there are good reasons to think that gilt yields will remain low and may not yet have found a floor. … …
The run of weaker news on the economic recovery has made a near-term interest rate rise even less likely than before. We expect this message to be re-iterated in August’s Inflation Report, published next week. … Risk of rate rise now pretty …
2nd August 2011
July’s CIPS/Markit report on manufacturing suggested that the industrial sector is continuing to contract, pouring cold water on hopes that a sustained recovery in manufacturing can offset weakening demand in the consumer and government sectors of the …
Q2’s meagre 0.2% rise in GDP means that the recovery still looks even weaker than that seen after the Great Depression. Of course, there is a lot of uncertainty about how much effect the various temporary factors in Q2 had. But it is hard to get …
Broad money and lending growth remained exceptionally weak in July, suggesting that nominal GDP growth is likely to ease back in time. The case for more quantitative easing is getting stronger. … Monetary Indicators Monitor …
30th July 2011
We doubt that the rise in the number of mortgage approvals marks the start of a recovery in housing market activity. Hence, with the benefits of low interest rates being relentlessly eroded by the rising cost of living, the recent stability of house …
July’s CBI Industrial Trends survey suggested that manufacturing output has failed to bounce back after the sequence of disruptions that dragged it down in the second quarter. Accordingly, the survey added to other evidence tentatively suggesting that …
28th July 2011
Q2’s GDP figures show that the economy is still barely growing. Admittedly it is hard to know how much growth suffered from the various temporary factors dragging on output in the quarter. Nonetheless, it still looks like GDP growth this year will be …
27th July 2011
There has been a striking divergence between the two main measures of employment recently. But regardless of which is painting the more accurate picture, the labour market outlook remains poor. … Which measure of employment is …
26th July 2011
Last week started on a relatively poor note for the UK, as the nation’s banks came off rather worse than most others from the European Banking Authority’s recent round of stress tests. Admittedly, none of the four major UK banks actually ‘failed’ the …
The continued squeeze on real pay suggests that consumer spending will keep falling for some time. Last week we revised down our forecast for GDP growth this year from 1.5% to 1% and now expect consumer spending to fall by 1.5%, rather than the 1% drop we …
22nd July 2011
The official measure of retail sales rebounded a bit in June, but the underlying trend remains broadly flat. Meanwhile, “Plan A” still seems to be struggling to deliver the planned falls in public sector borrowing. … Retail Sales & Public Finances …
The minutes of July’s MPC meeting suggested that over the past month the Committee has moved even further away from raising interest rates, with most members judging that “recent developments had reduced the likelihood that a tightening in policy would be …
21st July 2011
The Government is unlikely to switch to a Plan B incorporating a markedly slower pace of fiscal consolidation unless the economy is very weak or even in recession. Accordingly, the outlook under Plans A or B is one of weak growth, slow fiscal progress and …
19th July 2011
We now expect GDP growth of only 1% this year (compared to our previous forecast of 1.5%). We still expect growth of only 1.5% in 2012 and think that the economy will struggle to expand by more than 2% or so in 2013. Depending on how the euro-zone debt …
The common perception is that the fiscal squeeze will prompt the traditional North-South divide to widen. However, we think it is more likely that the different regions of the UK will see a more uniform performance in the next few years than in the past. …
15th July 2011
The labour market figures are still painting a bit of a mixed picture about the strength of the jobs recovery. But with the economic recovery still struggling, we continue to expect unemployment to rise further over the next couple of years. And with real …
14th July 2011
June’s better than expected consumer prices figures brought signs that underlying price pressures might be starting to ease and, along with May’s dreadful trade figures, pushed the interest rate debate in the direction of the MPC’s doves. … Consumer …
13th July 2011
The economy has been recovering for almost two years, yet many consumers will be feeling worse off than they did during the recession. With the squeeze on real pay likely to intensify even further, we still expect consumer spending to drop both this year …
12th July 2011
The activity surveys and the official data we have so far suggest that quarterly GDP growth in Q2 was just 0.2% or 0.3%. Part of this weakness just reflects a number of temporary adverse factors affecting growth in Q2, most obviously the extra bank …
June’s producer prices figures showed that cost pressures in the industrial sector are still intensifying, but at a slower pace than before. … Producer Prices …
9th July 2011
With the economic recovery still showing few signs of regaining momentum, the case for raising interest rates is looking weak. Indeed, we think that over the next couple of years renewed quantitative easing is more likely than an increase in interest …
8th July 2011
May’s rise in manufacturing output only just offset April’s bank holiday-related drop, adding to other evidence suggesting that the industrial recovery is weakening. … Industrial Production …
The bounce in house prices in June is unlikely to signal that the downwards pressure on house prices has abated. With the squeeze on real pay likely to intensify until well into next year, house prices still have further to fall. … Halifax House Prices …
7th July 2011
A raft of negative news from the high street suggests that falling real incomes are taking their toll on the consumer sector. … Consumers bowing under the …
6th July 2011
June’s UK CIPS/Markit report on services suggested that the recovery in the biggest part of the economy has regained a little momentum. But growth in the sector, and indeed the economy as a whole, remains very sluggish. … CIPS/Markit Report on Services …
Inflation fell sharply in most countries in the region last month, due in large part to a surprise drop in food prices. This appears to have been driven by one-off factors relating to the outbreak of e.coli in Germany. As such, we may see a bounce in food …
5th July 2011
Last week brought news of a string of collapses among well-known retailers. Meanwhile, even the relative winners on the high street are having to work harder to gain sales, with discounting reportedly particularly intense in the past couple of weeks. … …
June’s CIPS/Markit report on manufacturing appeared to confirm that the previously robust recovery in the industrial sector is rapidly losing steam. … CIPS/Markit Report on Manuf. …
2nd July 2011
There was little in the Bank of England’s latest Credit Conditions Survey to suggest that bank lending is set to pick up any time soon. … Credit Conditions (Q2), Cons. Conf. (Jun.) & Pay settlements …
1st July 2011
The Nationwide house price index was unchanged in June. But the regional indices show that the resilience of the national index over the past year or so is largely down to London where, in contrast to the rest of the country, house prices continue to …
There are still no signs of any pick-up in broad money or lending growth, suggesting that the medium-term outlook for both economic growth and inflation remains pretty weak. … Monetary Indicators Monitor …
30th June 2011
The latest mortgage lending figures confirm that housing market activity remains very weak. That’s unlikely to change while the squeeze on real pay continues. … Mortgage Lending …
There were no major changes to the overall growth picture in Q1’s National Accounts. But the economy does not appear to have been making as much progress towards rebalancing as previously appeared to be the case. … National Accounts & Balance of Payments …
29th June 2011
Last week’s public finances figures for May brought the clearest signs yet that the weakness of the economy is starting to hinder the Government’s fiscal consolidation efforts. … Sagging tax receipts put cracks in Plan …
28th June 2011
The minutes of June’s MPC meeting suggested that the Committee is moving even further away from a near-term interest rate rise – with more members starting to contemplate giving the economy extra support. … MPC Minutes …
23rd June 2011
May’s public finances figures brought the clearest signs yet that the weakness of the economy is having an adverse effect on the public finances. … Public Finances (May) & CBI Ind. Trends …
22nd June 2011
The Greek debt crisis escalated last week, but the UK has remained immune from the contagion fears that have spread to other debt-ridden countries in Europe. … UK escapes Greek contagion …
21st June 2011
