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The latest rise in mortgage approvals for house purchase cannot disguise the bigger picture of a lending market that is depressed. The subdued picture for net lending might also mean that anyone hoping for a further easing in mortgage credit conditions …
2nd June 2010
Companies balance sheets are in a broadly healthy state, suggesting that firms can avoid the prolonged period of deleveraging facing other parts of the economy. But there are plenty of other reasons why companies are unlikely to lead the economy into a …
1st June 2010
May’s CIPS/Markit report on manufacturing provided further evidence that the industrial recovery is still going strong. However, industry makes up less than a fifth of the economy and the recovery elsewhere looks less robust. … CIPS/Markit Report on …
Our initial response to the OECD’s recommendation that UK interest rates should rise to 3.5% by the end of next year (“completely mad”) may have been a bit extreme. Nonetheless, it seems to neglect three key factors which suggest such a rise would be both …
31st May 2010
The second estimate of Q1 GDP brought little sign of the re-balancing of the economy which will be vital if a solid recovery is to be maintained once the impending fiscal squeeze kicks in. … GDP: Output, Income and Expenditure …
25th May 2010
The planned efficiency savings detailed by the new Government today are just the tip of the iceberg. Much bigger cuts, alongside hefty tax increases, will be needed to bring the budget deficit down. … Spending cuts just the tip of the …
24th May 2010
Last week’s letter from Mervyn King to the new Chancellor George Osborne after inflation surprised on the upside again drew accusations that the Governor is being dangerously sanguine on the inflation outlook. And there were hints in the May MPC minutes …
Consumer spending has struggled to pick up again even though the various temporary factors weighing on spending earlier in the year have now disappeared. The consumer recovery may yet gain some momentum in the next few months. However, we remain concerned …
20th May 2010
April’s UK retail sales figures confirmed that high street spending continues to expand at a modest pace. With consumers set to shoulder a large part of the coming fiscal squeeze, the outlook for spending remains fragile. … UK Retail Sales …
If we are wrong in expecting UK consumer price inflation to fall back over the next year or so, the consequences for the economy - higher interest rates alongside a huge fiscal squeeze - could be disastrous. But we still think there are good reasons to …
19th May 2010
The minutes of May’s MPC confirmed that the Committee as a whole is still singing from the same Dovish hymn sheet as the Governor. Interest rates are unlikely to rise for a long time and further unconventional support is yet possible. … MPC Minutes …
CPI inflation surprised on the upside again in April. But Mervyn King made it clear in his letter to the new Chancellor George Osborne that the MPC is not about to panic and raise interest rates in response. … UK Consumer Prices …
18th May 2010
George Osborne’s presentation today of the new Office for Budget Responsibility as an answer to the previous Government’s habitual over-optimism on the economy and the public finances reinforces our expectation that the emergency Budget on 22nd June will …
17th May 2010
Co-ordination between fiscal and monetary policy already appears to have stepped up a gear since the new Government took office, with Bank of England Governor Mervyn King endorsing the Government’s planned cuts in spending this year. Whether or not …
The fact that the forthcoming emergency budget will incorporate economic and fiscal forecasts produced by the new Office for Budget Responsibility (OBR) increases the likelihood that it will include sizeable tax increases. … OBR could prompt bigger budget …
13th May 2010
March’s trade figures suggested that, after a period of weather-induced volatility, the underlying trend in net trade remains disappointingly weak. It remains hard to see what part of the economy is in a fit enough state to compensate for the looming …
The dovish tone of the Bank of England’s May Inflation Report suggested that the Monetary Policy Committee (MPC) has no intention of tightening policy anytime soon. If anything, it is more likely to loosen policy further. … Inflation Report (May) & Labour …
12th May 2010
While the first job for the coalition parties was to iron out the differences in their manifesto pledges, the tax changes announced are just a sideshow to the real action needed to address the fiscal crisis. … Tax bargaining just a sideshow to the great …
March’s industrial production figures confirmed that the industrial sector expanded strongly in the first quarter of the year. But industry is not big enough to drive a solid recovery in the overall economy. … UK Industrial Production …
11th May 2010
Political uncertainty no doubt played a large part in the decision by the Monetary Policy Committee (MPC) to keep policy unchanged today. But with a large fiscal squeeze looming - whatever government is formed - monetary policy will have to stay extremely …
10th May 2010
Whether or not the Conservatives and the Liberal Democrats are able to form a stable government will depend on all sorts of issues. But we see no reason why apparent differences on economic and fiscal policy should be a major stumbling block. … Economy …
The fact that a hung parliament was widely expected helped to dampen the impact on markets. But the key question now is whether the election result will prompt markets to start to put the UK in the same bracket as Greece and the euro-zone’s other …
News that the Halifax house price index suffered a marginal fall in April is a reminder that the recovery in house prices has not had a firm economic foundation. With the acute supply shortages that characterised the market last year now easing, and the …
7th May 2010
April’s UK CIPS/Markit report on services suggested that the recovery in the services sector is failing to maintain the momentum seen on the industrial side of the economy. … UK CIPS/Markit Report on Services …
6th May 2010
By any ordinary standards, the economic backdrop to the general election is poor. Only on three previous occasions since 1955 have elections taken place against a background of negative annual GDP growth. (See Chart.) Admittedly, the economic environment …
We are not convinced that a hung parliament in the UK would now be such bad news for all sterling assets. Whatever the outcome of tomorrow’s general election, we think 10-year gilt yields will drop to around 3% by the end of the year. We also expect the …
5th May 2010
Tomorrow’s general election will mark the beginning of a new and difficult phase for the UK economy. Get ready for the Great Squeeze. … UK election ushers in the Great …
May’s Monetary Policy Committee (MPC) meeting comes just before the publication of the next Inflation Report, making a change of policy slightly more likely than in the past couple of months. However, we think that the Committee is likely to stand pat …
There are finally tentative signs that the Bank of England’s programme of quantitative easing (QE) is boosting the broad money supply. However, bank lending, particularly to businesses, remains weak. … Monetary Indicators Monitor …
4th May 2010
April’s CIPS/Markit report on manufacturing provided further evidence that the economic recovery, for now, is building a decent amount of momentum. However, the continued weakness of housing market activity highlighted just one of the ways in which the …
The Government is going into the election against a fairly favourable backdrop of an expanding economy, a falling claimant count and rising house prices. So it may be disappointed that this economic improvement has not translated into a bigger pick-up in …
3rd May 2010
While all main parties look set to leave the current inflation-targeting regime in place, all seem agreed on the need for some form of so-called “macroprudential” toolkit. New tools to control asset prices and credit growth could allow policymakers to …
29th April 2010
The rapid escalation of the Greek fiscal crisis has prompted inevitable questions over whether the UK faces similar dangers. So far, UK markets are probably right to have been sanguine. But that might change if a clearer plan to address the UK’s fiscal …
This report is only available as a PDF. Click to download. … Nationwide House Prices (Apr.) …
House price inflation returned to double-digit rates in April, for the first time since June 2007. However, with the pressure on household incomes more likely to rise than ease and surveys pointing to a new mood of caution amongst buyers, house price …
The contradictory messages offered by the Halifax and Nationwide house price data make it almost impossible to draw clear conclusions about the health of the market. But, at the very least, May’s drop in the Halifax index highlights the fragility of the …
Analysis of the likely behaviour and influence of the exchange rate after the election has tended to focus on the possibility of a further sharp depreciation in the event of a hung parliament. But there are reasons why the opposite scenario – a …
28th April 2010
The argument over whether Labour’s National Insurance rise or the Conservatives’ efficiency savings will cost more jobs detracts from the bigger picture that the required fiscal squeeze will result in the loss of up to 750,000 public sector jobs over the …
With consumers so far fighting off any preelection nerves, the consumer recovery could gather further momentum in the next month or two. But the second half of the year should look rather different to the first as the recent sweet spot for consumers …
26th April 2010
Last week’s public finances figures for March, revealing a £3bn undershoot of the Chancellor’s forecast for public borrowing in 2009-10, may have raised hopes that the beneficial effects on the public finances of a stronger economy may relieve the need …
