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June’s household borrowing figures showed a continuation of the modest expansion in credit seen in recent months. But with mortgage approvals unexpectedly declining, evidence of a marked rise in consumer appetite for debt remains lacking, despite signs of …
29th July 2013
The main event this month is likely to be the announcement of formal forward guidance. We expect the Monetary Policy Committee (MPC) to commit to keep official interest rates low until an unemployment threshold is breached. Any commitment will be …
The succession of sporting achievements, the sizzling summer and the Royal baby have supposedly lifted British spirits and fostered hopes that this improved sentiment will give an extra boost to the economic recovery. But a sober look at the statistics …
While all households have faced elevated inflation in recent years, the experience has not been uniform. However, differences in inflation rates are likely to be narrower over the next few years than in the past and all household types should benefit from …
25th July 2013
The first estimate of GDP in Q2 confirmed that the UK recovery is picking up pace. While there are still significant obstacles to overcome before a strong and sustained recovery is in sight, the economy is continuing to move in the right direction. … …
Although the Monetary Policy Committee left interest rates and quantitative easing unchanged at new Governor Mark Carney’s first meeting today, it took the first step towards introducing some sort of guidance on the future path of interest rates. We …
24th July 2013
The Chancellor is today meeting major lenders and housebuilders to discuss how the second (mortgage guarantee) element of the Government’s Help to Buy programme will work. While the policy has been criticised for its ropey economics, it may be more …
23rd July 2013
The main message from last week’s minutes of the latest MPC meeting was not so much a reduction in the Committee’s appetite for more stimulus, but rather a change of view on how to enact it. Meanwhile, there is an increasing body of evidence to suggest …
22nd July 2013
After being hit by bad weather earlier in the year, consumer spending appears to have made up lost ground more recently. Indeed, the consumer sector appears to be driving the wider economic recovery. … Consumer spending remains on the …
19th July 2013
The underlying picture for the public finances is one of stalled progress in deficit reduction. The Chancellor will be hoping that the nascent economic recovery will change this picture soon. But, for now, and stripping out various temporary factors, the …
June’s second consecutive monthly expansion in retail sales volumes provided further evidence that a consumer-led recovery is gaining strength. But, although consumer confidence is picking up and unemployment falling, the headwind to recovery presented by …
18th July 2013
The minutes of July’s MPC minutes suggested that the new Governor Mark Carney has united the Committee around using forward guidance rather than more quantitative easing to boost the economy. Meanwhile, the latest labour market figures showed encouraging …
17th July 2013
June’s inflation figures suggested that underlying price pressures in the economy are still fairly weak and have therefore kept the door wide open to more action from the Monetary Policy Committee at next month’s crucial meeting. … Consumer Prices & …
16th July 2013
Boris Johnson suggests closing Heathrow and building a new airport at either Stansted or the Isle of Grain. (He is distancing himself from his original ‘Boris Island’ idea.) There could be serious consequences for the M4 corridor, and perhaps other areas …
Sterling hit the headlines again last week as it weakened further against the dollar and euro. Meanwhile, last week’s slightly weaker economic data suggested that GDP growth in Q2 might not surge as much as some were starting to expect. … Sterling back …
15th July 2013
With Mark Carney having already primed expectations at July’s MPC meeting, we still expect the MPC to embark on full-blown forward guidance at its meeting next month. An unemployment threshold is perhaps most likely, but the drawbacks to using this …
12th July 2013
Following Mr Carney’s arrival at the Bank of England, the pound this week touched its lowest level against the dollar since 2010. The fact that the new Governor seems to have had no qualms about immediately jumping into forward guidance suggests that he …
11th July 2013
The fairly modest impact of the MPC’s initial stab at ‘forward guidance’ on gilt yields has cast doubt over whether a formal commitment to keep monetary policy loose will do much to lower gilt yields while those on US Treasuries are rising. But we still …
May’s industrial production and trade figures were something of a disappointment given the recent upbeat tone of the manufacturing surveys. Although the overall economic recovery may still have gathered pace in the second quarter, it now seems unlikely …
9th July 2013
With further expansion in June meaning the BRC’s measure of retail sales has now been positive in five of the first six months of 2013, the consumer recovery seems to be gaining an ever-firmer footing. But the longer-term sustainability of this recovery …
The continued lockstep movement of gilt and Treasury yields has called into question whether the new Bank of England Governor Mark Carney faces an impossible task trying to decouple the two. However, UK and US bond yields have diverged in the past when …
The recent jump in long-term interest rates has raised concerns over the impact of higher borrowing costs on the nascent consumer recovery. While the rise clearly isn’t helpful, the continued squeeze on real pay probably remains the bigger threat. … …
8th July 2013
We are publishing our latest UK Quarterly Review today and the economic mood has brightened considerably since the last Review when a triple-dip was still a real possibility. Although GDP growth over the next couple of years will hardly be spectacular, we …
The list of indicators signalling that the recovery is gaining momentum continued to get longer last week. However, the recent news on the inflation outlook – which has perhaps gone relatively unnoticed – has arguably increased the scope for more …
4th July 2013
The run of generally good economic news continues. In view of the economy’s recent performance, we have raised our forecast for GDP growth this year from 0.2% to 0.8% (although we have left our forecast for 2014 at 1.5%). … Recovery still developing …
3rd July 2013
With a sharp rise in June’s CIPS/Markit measure of services activity joining further improvements in the manufacturing and construction surveys, it looks increasingly likely that GDP growth in Q2 will turn in a decent performance. While the recovery still …
The recent jump in UK government borrowing costs is hardly a welcome development in the face of a budget deficit that remains historically high. But with some rise in yields already factored into deficit forecasts and the recent climb likely to be …
2nd July 2013
While broad money growth is holding firm, bank lending is continuing to contract. Although the Bank of England’s Funding for Lending Scheme appears to have stimulated consumer lending, corporate lending has yet to pick up in response to the Scheme’s …
1st July 2013
May’s household borrowing figures show that, with households continuing to take on new debt and signs of life in the housing market, a consumer recovery may be taking root. But with real incomes falling, higher borrowing can sustain spending for only so …
Today’s figures indicate that the recovery in manufacturing and mortgage lending – hitherto two of the weakest parts of the economy – is gathering steam. … CIPS Report on Manuf. (Jun.) & Household Borrowing …
Despite the recent improvement in the economic data, there is still a strong case for the new Governor Mark Carney to give the economy additional support in order to boost the chances of the recovery becoming entrenched. He might even announce something …
A number of developments last week supported our view that Mr Carney will need to give the economy more help. He might even hit the ground running by announcing something at his first meeting this Thursday, although we think it more likely that he waits …
The Nationwide reported that house prices have continued to drift gently upward, with favourable base effects helping the annual rate of growth to a 2½ year high. But price gains are not accelerating – household sector finances are simply not strong …
28th June 2013
The further slight rise in consumer confidence will raise hopes that the consumer spending recovery could be gathering momentum. But we doubt that any recovery can be sustained while real pay is still contracting sharply. … GfK/NOP Consumer Confidence …
Today’s news on the state of households’ finances shows that consumer spending is continuing to rise despite falling real incomes. But that this is only being achieved by a sharp fall in saving suggests that the recent growth may be hard to sustain. … …
27th June 2013
The latest GDP revisions show that the UK has further to go in terms of regaining pre-crisis levels of output than previously thought. And although the breakdown of Q1 GDP now looks a bit more encouraging, it nonetheless indicates that the recovery is …
There were virtually no changes in the overall fiscal plans in today’s Spending Review. Accordingly, the Review did nothing to alter the prospect of a prolonged period of government spending cuts. In fact, it set out only a fraction of the pain still left …
26th June 2013
This report is only available as a PDF. Click to download. … CBI Distributive Trades Survey (Jun.) …
25th June 2013
With gilt yields now at their highest level since early 2012, the growing expectation that the Fed will taper its asset purchases could boost the chances of the MPC expanding its own purchases. … Rise in gilt yields supports case for more …
24th June 2013
After losing momentum in March and April, consumer spending appears to have regained some oomph as the second quarter has progressed. … Sharing in the …
21st June 2013
The improvement in the public finances in May was due to temporary factors. In any case, with borrowing still so high, the big picture is that years of austerity still lie ahead, as will be underlined by next Wednesday’s Spending Review. … Public finances …
Next Wednesday’s Spending Review will essentially just flesh out how the cuts that have already been announced will be achieved. Nonetheless, the Government may use it to shift around its spending in a slightly more growth-friendly way. And the Review has …
20th June 2013
Continuing a recent run of good economic news, May’s rise in the official measure of retail sales will have partly reflected the fading drag from the unusually cold weather seen earlier in the year. But the underlying retail picture appears to be …
June’s MPC minutes confirmed that the outgoing Governor Mervyn King was outvoted at his final meeting and that appetite on the majority of the Committee for more policy stimulus remains muted. However, we still think that Mr Carney will usher in a new …
19th June 2013
May’s rise in inflation confirmed that April’s fall was primarily the result of some temporary factors. That said, the peak is hopefully not too far away now. … Consumer Prices & Producer Prices …
18th June 2013
The recent rise in market rate expectations highlights why Mark Carney might be keen to give reassurance that interest rates will not rise, even as the economy starts to pick up. … Rise in rate expectations boosts case for …
17th June 2013
April’s construction figures are better than they look, given that the data are not seasonally adjusted. On the face of it, they tentatively suggest that construction could help the economic recovery in the second quarter – even if that is just by …
14th June 2013
Investors’ fears that central banks will tighten – or at least stop loosening – monetary policy sooner than previously thought have prompted both UK equity and bond prices to fall sharply. Upward revisions to expectations for official interest rates have …
13th June 2013
A tentative pick-up in tax receipts has lent some support to the growing signs of economic recovery. While the improvement is so far modest, tax revenues tend to lag changes in economic activity, so any improvement at this stage should be seen as a good …
