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Consumer spending has fallen for two quarters in a row, meaning that the household sector is now technically back in recession. Although high street spending picked up in April, that appears to have been only a temporary improvement in response to the …
17th June 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. … Retail Sales …
The labour market figures are still giving a bit of a mixed picture about how well the jobs recovery is faring. But the squeeze on real pay is very clear – reinforcing our concerns about the outlook for consumer spending. … Labour Market Data …
16th June 2011
May’s unchanged CPI inflation rate represents just a temporary pause in an upward trend which could take inflation to 5.5% or above. But medium-term influences still point to sharp falls in inflation next year and beyond. … Consumer Prices …
15th June 2011
Deliberately embracing higher inflation as a way out of the sovereign debt crisis could have disastrous consequences. Instead, for most advanced countries, wherever it is feasible, a combination of fiscal austerity and sustained economic growth offers the …
14th June 2011
The Chancellor is stuck between the proverbial rock and hard place. Yes, the fiscal squeeze is stifling the recovery. But abandoning the consolidation would not guarantee that growth prospects would be any better. … Between a rock and a hard …
April’s industrial production figures were heavily distorted by one-off factors and were therefore not nearly as bad as they look. Still, with the trend in activity slowing and cost pressures still very strong, the outlook for industry is far from rosy. … …
11th June 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 …
9th June 2011
April’s UK trade figures suggested that the big boost to GDP growth in the first quarter from the external sector is unlikely to be repeated this quarter. … Trade …
The ongoing concerns over the lack of a “Plan B”, should the economy be weaker than the Government’s fiscal plans assume, underline the need for interest rates to stay low for a long time yet. … Plan B worries underline low interest rate …
7th June 2011
The latest small rise in the Halifax house price index does little to change the bigger picture that prices on this measure are trending lower. Given the struggling economic recovery and the fact that the fiscal contraction will only get more severe from …
There is little chance of an interest rate rise this month. Last month’s Inflation Report did not suggest that an imminent rate hike was required. And the economic data have retained a fairly soft tone. There is still a danger of a rise later this year. …
6th June 2011
On the face of it, the sharp drop in last week’s manufacturing PMI suggested that output in the sector has actually started to fall again. It is clearly disappointing that even the previously bright spot of the recovery is now starting to crumble. … Even …
May’s CIPS/Markit report on services was thankfully not as bad as the manufacturing survey released earlier this week. Nonetheless, the slight deterioration provided further evidence that the economic recovery is still struggling. … CIPS/Markit Report on …
3rd June 2011
The relative performance of the regions of the UK over the next few years depends in part on their different exposure to the public sector and the fiscal squeeze. The fringes of the UK – and Northern Ireland in particular – stand to be worst affected, but …
2nd June 2011
The long-awaited re-balancing of the economy seems to be underway, with net trade making a huge positive contribution to quarterly GDP growth in Q1. However, the 1.3% contraction in domestic demand was not pretty, driven by falls in both consumer spending …
The latest monetary indicators show that broad money growth remains exceptionally weak, suggesting that the recent slowdown in the pace of economic recovery may be more than just a temporary soft patch. … Monetary Indicators Monitor …
1st June 2011
Today’s manufacturing and household borrowing data provided further evidence that the UK’s economic recovery is now struggling across the board. … CIPS/Markit Report on Manuf. (May) & H'hold Borrowing …
A re-balancing of the economy has been needed for some time – but this wasn’t quite what we had in mind! The danger now is that domestic demand continues to weaken, while net trade is unable to keep up this degree of support. … Re-balancing in the …
30th May 2011
December’s producer prices figures revealed that cost pressures in the manufacturing sector are continuing to intensify. But this should not prevent consumer price inflation from falling back in the medium term. … Nationwide House Prices …
27th May 2011
The lack of any upward revision to UK GDP in Q1 leaves the economic recovery still looking disappointingly weak. Of course, we are now over halfway through the second quarter. But while high street spending has done well over the last couple of months, …
25th May 2011
April’s public finance figures have got the new fiscal year off to a bad start. We continue to doubt that the Government will be able to get borrowing down to meet the fiscal projections this year or next. … Public Finances …
24th May 2011
The breakdown of the strong 1.1% monthly rise in sales volumes in April suggested that this strength primarily reflected a temporary boost from better weather and the Royal Wedding. What’s more, last week’s data underlined the pressures still bearing down …
23rd May 2011
Consumer spending received a boost in April from the favourable combination of the good weather, the later fall of Easter and the Royal Wedding. However, this support is only temporary and we suspect that consumer spending has subsequently reverted to the …
19th May 2011
April’s official measure of retail sales supported other evidence showing that the high street enjoyed a bit of a bounce last month. However, it looks like this strength primarily reflected the temporary boost from better weather and the Royal Wedding and …
The good news on inflation did not last for long, with April’s sharp rise more than reversing March’s drop. However, the increase was driven by temporary factors and we still expect inflation to fall back next year. … Consumer Prices …
17th May 2011
The industrial recovery appears to have come off the boil. However, although the manufacturing sector now looks unlikely to return to the impressive 5% plus annual growth rates seen towards the end of last year, we think that the recovery still has some …
16th May 2011
On the face of it, last week’s Inflation Report – showing inflation projected to be on target in two years’ time – endorsed market expectations of a modest rise in interest rates over the next couple of years. But there are a number of reasons why …
The recent slowdown in the pace of recovery is probably due in part to the fiscal tightening measures that have already been put in place. But with the bulk of the government spending cuts yet to come, the downward pressure from the fiscal squeeze is set …
12th May 2011
March’s industrial production figures poured more cold water on hopes that the sector will be able to keep up its recent support for the overall economic recovery. … Industrial Production …
May’s Bank of England Inflation Report left the outlook for interest rates finely balanced. But we remain of the view that the markets are overstating the likely level of rates over the next couple of years. … Bank of England Inflation Report …
11th May 2011
The widening in the UK trade deficit in March was all but inevitable after such a sharp narrowing in the previous two months and the big picture is that the trade position is still looking a lot better than it was a few months ago. … Trade …
After stabilising in the past few months, the main house price indices again appear to be on their way back down. Given the weak activity data and the overvaluation in the market, this should come as little surprise. … Halifax House Prices …
9th May 2011
This will be the fourth Inflation Report in a row that the MPC will be in the uncomfortable position of revising down its GDP growth forecast for 2011 but revising up its inflation forecast. But of course the big question is what happens to the inflation …
April’s producer prices figures showed that cost pressures have continued to build in the manufacturing sector, but more recent developments suggest that these pressures may turn out to be short-lived. … Producer Prices …
6th May 2011
The news that GDP rose by only 0.5% in Q1 means that underlying activity has been broadly flat over the past six months. With the full effect of the fiscal tightening yet to be felt, we expect the recovery to struggle to regain momentum over the rest of …
5th May 2011
We continue to expect falling real incomes to prompt consumer spending to drop this year. In fact, with inflation possibly heading to 5% and pay growth showing few signs of following, we recently revised our forecast for the fall in spending this year …
Given the dismal state of the recovery, it was hardly a surprise that the Monetary Policy Committee kept interest rates on hold today. Most forecasters have reacted to the recent run of weaker news by simply pushing back their expected timing of the first …
The drop in April’s CIPS/Markit report on services echoed the falls already seen in the sister manufacturing and construction surveys and provided further evidence that the economic recovery is struggling to regain momentum. The MPC therefore still looks …
It is often assumed that the fiscal squeeze is driving the current weakness of consumer spending and that government measures – such as a VAT cut – are all that are needed to get the consumer recovery back on track. But real pay began to fall long before …
Monetary indicators continue to show that broad money growth is exceptionally weak, consistent with inflation eventually falling sharply in the medium term. … Monetary Indicators Monitor …
4th May 2011
Today’s data suggested that the housing market remains in a fragile state, while the construction sector seems to have started the second quarter on a weak footing. … Household Borrowing (Mar.) & CIPS Construction …
March’s fall in inflation and a run of weak news on the economic recovery have left an interest rate rise at this month’s Monetary Policy Committee meeting looking relatively unlikely. With inflation likely to rise further over the coming months, a rate …
3rd May 2011
April’s CIPS manufacturing survey provided further evidence to suggest that the best days of the industrial recovery are behind us. … CIPS/Markit Report on Manufacturing …
Clearly there is a limit to how much weight anyone, the MPC included, should put on the provisional GDP figures. Nonetheless, it would take a pretty substantial upward revision to leave the recovery looking even half decent. … Recovery, what …
2nd May 2011
Q1’s GDP figures suggest that the recovery has completely ground to a halt since last autumn, with underlying activity pretty much stagnant for the past six months. The chances of an interest rate rise next month now look even slimmer. … Preliminary GDP …
27th April 2011
April’s CBI industrial trends survey provided a bit more evidence to suggest that the manufacturing recovery is no longer gaining pace. … CBI Industrial Trends Survey (Apr. and …
26th April 2011
At first glance, the marriage of Prince William to Miss Catherine Middleton on Friday 29th April hardly seems to be an important economic issue that merits close examination. Nonetheless, the Royal Wedding is likely to add to the volatility of the …
25th April 2011
Just as the snow-related distortions have faded, Easter timing effects have come along to muddle the picture instead. But as far as we can tell, the underlying trend in consumer spending is flat at best. … Easter muddles the …
21st April 2011
March’s retail sales figures were slightly more upbeat than the other recent news on consumer spending. The public finance figures were a bit better than expected too. But it is hard to be optimistic when consumers’ real incomes are being squeezed so …
