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With inflation falling faster and slack in the labour market being used up more slowly than the MPC expected in February’s Inflation Report, the decision to leave Bank Rate on hold at this month’s meeting should be straightforward. This may be fortuitous, …
4th April 2014
The last month has brought more good news on inflation. CPI inflation eased from 1.9% to 1.7% in February, the lowest rate since October 2009. Meanwhile, past falls in commodity and import prices suggest that inflation will continue to descend over the …
3rd April 2014
The further deterioration in the tone of the CIPS/Markit services survey in March shouldn’t ring too many alarm bells about the strength of the economic recovery. … CIPS Report on Services (Mar.) & Credit Con. Survey …
Although March’s CIPS manufacturing report indicated that the sector’s recovery may have lost some steam over the first quarter, this seems unlikely to herald the beginning of a renewed slowdown. … CIPS Report on Manuf. (Mar.) & FPC Record …
1st April 2014
February’s money and lending figures provide further reassurance that the economic recovery has maintained its strong pace this year and is not being powered by a surge in credit. … Monetary Indicators Monitor (Mar …
31st March 2014
Although overall household borrowing rose in February, the sharp fall in mortgage approvals suggests that activity in the housing market may be stabilising. Accordingly, the housing recovery does not appear to be fuelled by a borrowing binge. … …
The further fall in CPI inflation in February is unlikely to be the last this year. Past movements in global commodity prices, recent announcements by energy suppliers and the emergence of a supermarket price war suggest that food and energy inflation …
The latest data on the state of households’ finances confirmed our fears that the recovery in spending over recent quarters has been driven largely by consumers saving less. But the consumer recovery should move to a more sustainable footing soon as real …
28th March 2014
The national accounts for the fourth quarter presented a mixed report card on the economy’s progress towards rebalancing. … National Accounts & Balance of Payments …
March’s GfK/NOP survey showed that consumers remain in buoyant mood and supports our expectation that the recovery in household spending will maintain its recent momentum. … GfK/NOP Consumer Confidence …
The recovery in consumer spending has shown no signs of slowing this year, with indicators suggesting that both retail and consumer services spending have grown strongly. Admittedly, households have partly funded their extra spending by saving less. But …
27th March 2014
February’s surge in retail sales confirmed that consumers are still loosening their purse strings and provided some reassurance that the economic recovery has not lost pace in the first quarter. … Retail Sales (Feb …
Despite the slightly weaker tone of March’s CBI Distributive Trades Survey, retailers enjoyed decent sales growth over Q1 as a whole. And looking ahead, we expect the consumer recovery to maintain its current momentum. … CBI Distributive Trades Survey …
25th March 2014
The further fall in CPI inflation in February took it another step towards the 1% rate which we think it could reach later this year and which would provide additional support to the economic recovery. … Consumer Prices & Producer Prices …
The fact that members of the Monetary Policy Committee (MPC) are advancing personal estimates of the output gap expressed to the nearest 0.1% suggests that policymakers may be putting too much emphasis on what is, after all, an unobservable and highly …
24th March 2014
It has become increasingly clear that the Chancellor’s Budget was not quite as fully-financed as it first appeared. Many of the permanent giveaways were paid for by takeaways which will provide only a temporary source of revenue. Meanwhile, the forecasts …
February’s public finances figures confirmed that the UK’s budget deficit is continuing to make steady but slow downward progress. But the fiscal consolidation still has a very long way to go. … Public Finances …
21st March 2014
The meagre giveaway to consumers in yesterday’s Budget did little to change the reality that fiscal policy will impart a moderate squeeze on households’ incomes over the next few years. Indeed, the squeeze is set to intensify after the general election …
20th March 2014
Today’s figures showed that the recovery in the labour market is slowing, increasing the chances that the MPC keeps official interest rates on hold until late next year. … Labour Data (Jan./Feb.) & MPC Minutes …
19th March 2014
Despite the comparative strength of the UK’s economic recovery, UK equity prices have continued to underperform those in other developed markets. While the recent underperformance may have partly reflected the UK equity market’s relatively high proportion …
18th March 2014
Wednesday’s labour market figures look set to show that the unemployment rate resumed its downward trend at the start of 2014. But they also seem likely to confirm that there is still plenty of spare capacity in the economy that can be used up before …
17th March 2014
The Government’s failure thus far to gain credit for the recovery might point to a sizeable net giveaway in Wednesday’s Budget. But Mr Osborne’s room for manoeuvre is limited and, with a risk that economic sentiment will fall again before next May, he is …
The latest trade figures show that the economic recovery is still struggling to broaden out to include exports. This looks likely to remain the case so long as the euro-zone’s economic recovery remains sluggish. … Trade …
14th March 2014
January’s official figures show that a steady recovery in industrial production is still underway, despite the pound’s recent appreciation and the continued weakness of demand in key European export markets. … Industrial Production …
11th March 2014
Although the latest BRC figures suggest that the recovery in retail sales lost some momentum in February, this does little to alter our view that 2014 should be a good year for consumer spending. … BRC Retail Sales Monitor …
Last week’s news that house prices surged in February will have done little to dispel concerns that record low interest rates are contributing to the emergence of a renewed house price bubble. Nonetheless, there are many reasons to think that there is …
10th March 2014
The MPC’s decision to leave interest rates on hold, marking five years since they reached their record low, is likely to be repeated many more times. With recent news suggesting the MPC’s estimate of spare capacity is too conservative, we think the sixth …
6th March 2014
The squeeze on real earnings is continuing to ease, increasing the chances that 2014 is the first year that real pay rises since the financial crisis. Granted, the headline (three month average of the annual) growth rate of earnings only edged up to 1.1% …
5th March 2014
February’s CIPS/Markit services survey suggested that the economic recovery still has considerable momentum but is not prompting inflationary pressures to build. … CIPS/Markit Report on Services …
The UK economy should not feel any major adverse effects from the crisis in Ukraine since trade and financial exposures to it and Russia are small. The biggest threat is from higher commodity prices, but only a major and sustained rise would cause UK …
4th March 2014
March’s Monetary Policy Committee (MPC) meeting will mark the fifth anniversary of interest rates falling to their record low of 0.5% in 2009. Since the MPC only set out its new guidance last month, this week’s meeting is likely to pass without event. But …
January’s slowing of growth in the broad money supply and lending confirms that the recovery is neither generating inflation nor being fuelled by an unsustainable pick-up in borrowing. … Monetary Indicators Monitor (Feb. …
3rd March 2014
Household borrowing fell back a touch in January, providing further evidence that the recovery is not being fuelled by a consumer borrowing binge. Indeed, credit is still well below pre-crisis levels and a number of market and regulatory forces could …
February’s CIPS manufacturing report confirmed that the sector’s recovery has not been knocked off course by sterling’s appreciation. Meanwhile, although the latest data show mortgage lending is picking up, economy-wide lending remains very weak. … CIPS …
Last week’s GDP figures showing that investment rose sharply in Q4 should ease concerns that the economic recovery is too dependent on an unsustainable consumer spending splurge. And there are several reasons to expect investment to continue to provide a …
February’s GfK/NOP survey showed consumer confidence holding steady at its joint highest level since August 2007. And there is scope for it to rise this year. … GfK/NOP Consumer Confidence …
28th February 2014
We doubt that UK asset prices will be undermined significantly by the onset of tighter monetary policy in the UK or overseas. Admittedly, history suggests otherwise – the global monetary tightening cycle that began after the early 1990s recession resulted …
27th February 2014
The second estimate of Q4 GDP provided further reassurance that the economic recovery is becoming better balanced and is therefore set to last. … GDP: Second Estimate & Expenditure Breakdown (Q4 …
26th February 2014
February’s strong CBI Distributive Trades Survey should sweep away any concerns fostered by January’s fall in the official measure of retail sales volumes that the recovery in retail spending is running out of steam. … CBI Distributive Trades Survey …
25th February 2014
As things stand, sterling’s recent appreciation should not take too much of the wind out of the recovery’s sails. Exporters have already shown some willingness to accept tighter margins in order to support their production. And even if they do raise their …
24th February 2014
Consumer spending still looks set to grow strongly this year. Real incomes should be boosted by a gradual pick-up in pay growth, falling inflation and further increases in employment. And with the housing market recovery likely to continue apace, …
21st February 2014
The sharp monthly drop in retail sales volumes in January is unlikely to herald the start of a consumer spending slowdown. Meanwhile, the fiscal consolidation remains on track despite January’s disappointingly small budget surplus. … Retail Sales & …
The latest labour market data showed that there is still plenty of spare capacity in the job market. Since the minutes of February’s MPC meeting confirmed that the Committee is committed to eliminating most of the slack in the economy before tightening …
19th February 2014
January’s consumer prices figures showed that inflationary pressures are continuing to ease steadily and so presented another reason to be upbeat about the outlook for GDP growth this year. … Consumer Prices & Producer Prices …
18th February 2014
Wednesday’s labour market figures seem likely to indicate that there is still considerable slack in the economy which will keep inflationary pressures subdued for some time to come. Indeed, by our reckoning, the unemployment rate looks likely to have held …
17th February 2014
The Monetary Policy Committee’s decision to drop the unemployment threshold and introduce phase two of forward guidance does not guarantee that interest rates will stay on hold for a long time yet. However, if we are right in expecting inflation to fall …
Once again, UK asset prices appear to have been influenced more by overseas events than domestic developments. Despite further signs that the UK economy is growing at a faster rate than the rest of the G7, UK equity prices have fallen broadly in line with …
13th February 2014
The revamp of the Bank of England’s forward guidance unveiled in February’s Inflation Report is likely to shift the emphasis back to the benign outlook for inflation and should therefore ensure that monetary policy remains very loose for some considerable …
12th February 2014
January’s BRC sales figures provided further evidence that 2014 got off to a good start for retailers. And, nothwithstanding the erratic nature of the monthly indicators, the outlook for the consumer sector appears bright. … BRC Retail Sales Monitor …
11th February 2014
The likely change to the MPC’s forward guidance alongside next week’s February Inflation Report could result in more changes to the contents of the Report. But the Committee’s inflation forecast should make it clear that monetary policy is on hold for …
10th February 2014
