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The fall in April’s CBI Distributive Trades Survey provides further reason to think that the pick-up in the consumer sector earlier this year was just temporary. With employment now falling and the squeeze on real pay intensifying, retailers face an …
24th April 2013
Today’s modifications to the Funding for Lending Scheme should make it a more effective tool in reducing the cost of loans for small companies. But with banks undercapitalised and the demand for credit still weak, the announcements improve the overall …
The latest CBI Industrial Trends survey has continued to present conflicting signals on the health of the manufacturing sector. All things considered, we would place more weight on its downbeat signals, given that they corroborate other evidence. … CBI …
23rd April 2013
From the Chancellor’s perspective, March’s public finances data delivered some good news, with underlying borrowing for 2012/13 coming in below 2011/12’s level. But the big picture is that the Government still ran an underlying deficit of almost 8% of …
After what seems like a lifetime of speculation, we will finally get the official verdict this week on whether the UK is in a triple-dip recession or not. We still think that the chances of a further contraction in GDP in the first quarter are pretty much …
22nd April 2013
The labour market’s recent deterioration threatens to nip the nascent recovery in consumer spending in the bud. Employment has begun to fall again and the forward-looking surveys suggest no imminent improvement. Meanwhile, pay growth has ground to a halt. …
19th April 2013
March’s fall in the official measure of retail sales volumes was unsurprising given that month’s unusually severe weather. This still left sales up in the first quarter of 2013 as a whole. Nonetheless, shoppers may not be enough to save the economy from a …
18th April 2013
The Monetary Policy Committee (MPC) still seems to be in a state of paralysis ahead of the new Governor’s arrival in July, despite indications that the weakness of the economy is finally starting to affect the labour market. … MPC Minutes (Apr.) & Labour …
17th April 2013
While CPI inflation rate was unchanged at 2.8% in March, it still looks set to climb over the summer. Nonetheless, the recent fall in oil prices has brightened the outlook for inflation further ahead. … Consumer Prices & Producer Prices …
16th April 2013
High street spending has put in a reasonable performance since the start of the year. And there are at least some conditions in place that might allow the momentum in consumer spending to build further. But major headwinds remain. So we doubt that we are …
15th April 2013
The recent fall in gilt yields has reflected a combination of weak news on the UK economy, a renewed rise in safe-haven demand in response to the crisis in Cyprus and a slight building of hopes of more QE. Any concerns that February’s debt downgrade would …
10th April 2013
In the subdued retail environment of recent years, one bright spot has been rapid growth in online sales. Even in the difficult conditions in 2012, internet purchases grew by 15%. With 90% of sales still store-based and internet penetration far from …
Given the controversy about the tax and benefit changes introduced in recent days, the point that these measures are in aggregate putting some cash in households’ pockets has been overlooked. That said, the amount is small and unlikely to stop consumer …
9th April 2013
While February’s industrial production and trade figures increased the chances that the economy has just about avoided a so-called triple-dip recession, they hardly painted a picture of strength. … Industrial Production & Trade …
Against the recent awful weather, March’s BRC Retail Sales Monitor delivered a reasonably positive result. While the timing of Easter will have provided a boost to March’s figure, sales in Q1 as a whole seem to have gathered some momentum. But whether …
Recent developments in Japan, with a new central bank governor and the unleashing of radical monetary policy measures, may offer hope for the UK as Mark Carney’s arrival moves closer. … Does Japan offer hope for a stagnating …
8th April 2013
Any progress the economy was making towards becoming less dependent on unsustainable sources of growth has stalled. Until the euro-zone economy stabilises, an export-led and hence better-balanced economic recovery in the UK looks set to remain elusive. …
4th April 2013
Although the Monetary Policy Committee left policy on hold again today, we suspect that the decision was still a close one. And while the chances of more asset purchases in May have perhaps declined, we still think that Mark Carney’s arrival in July could …
The modest uptick in March’s CIPS/Markit report on services still suggests that GDP did no better than flatline in Q1 and that a triple-dip remains a risk. The faint signs of life in the economy may nevertheless cause the MPC to stay its hand at today’s …
There is growing talk about the ‘zombification’ of the UK economy, with unviable companies locking up resources and impeding bank lending to new firms. But an economic recovery could well reveal ‘zombie’ firms to be in better shape, and if loans to such …
3rd April 2013
The Bank of England’s latest Credit Conditions Survey indicates that the Funding for Lending Scheme is still having a positive impact on the supply and cost of credit. But even if lenders follow through on their promises to make more credit available, it …
The slower growth in the broad money supply in February suggests that the previous month’s pick-up was just a blip. Meanwhile, bank lending to the private sector is still flat-lining, adding to the early disappointing evidence on the impact of the Funding …
2nd April 2013
February’s household borrowing figures suggested that, while mortgage lending continues to struggle, the recent signs of life evident in the consumer sector may be translating into a pick-up in consumer credit. But the impact of the Funding for Lending …
The weakness of the CIPS manufacturing survey in March suggests that the economy is continuing to make little progress towards rebalancing and has kept the threat of a so-called triple-dip recession alive. … CIPS Report on Manuf. (Mar.) & Mortgage …
News last week of a record current account deficit and a sharp drop in the household saving ratio highlighted once again the failure of the UK economy to rebalance away from consumption-led growth towards exports and investment. … 'Unbalanced' growth …
1st April 2013
The minutes of March’s Monetary Policy Committee meeting suggested that those against doing more QE will not have their minds changed easily. And the remit change in the Budget ended up being fairly vague, with the key decision on forward guidance kicked …
28th March 2013
March’s still weak level of consumer confidence tallies with evidence from the CBI’s Distributive Trades survey that the consumer sector is still fundamentally quite fragile. And looking ahead, we doubt the Chancellor delivered enough in his Budget to …
The gentle recovery in household spending continued at the end of last year. However, the fact that households had to save less in the fourth quarter in order to raise their spending suggested that the recovery is still built on shaky foundations. … Rise …
27th March 2013
Those inclined to see the glass half-full have pointed out that the recovery looks healthier once you strip out the sectors that have had a disproportionately adverse effect on growth recently. However, we cannot be sure that the weakness in these sectors …
The national accounts confirmed that the UK economy finished last year on a very weak footing and kept alive the risk of a triple-dip recession. Meanwhile, the Financial Policy Committee’s statement underlined the scale of the funding challenge that lies …
March’s CBI Distributive Trades Survey was something of a mood dampener following a run of good news from the retail sector. With real pay continuing to be squeezed and little in the recent Budget to support incomes this year, this may be a harbinger of …
26th March 2013
Tomorrow’s current account figures are likely to suggest that the hoped for rebalancing in the economy is still not happening and could put some renewed downward pressure on the pound. … Is the record current account deficit a cause for …
Although the current spell of cold and snowy weather is unlikely to have lasting economic consequences, a look back to previous cold snaps suggests that it might just be enough to make the difference between GDP stagnating and falling in the first …
25th March 2013
The consensus is that George Osborne made the best of a bad hand last week. Nonetheless, this was not a Budget to get the UK recovery back on track. … Budget leaves dismal growth outlook …
While consumer spending has shown some signs of life in the first part of this year, the momentum will be difficult to sustain. Although some of the measures announced by the Chancellor in the Budget, such as the cancellation of the fuel duty rise, will …
22nd March 2013
Following the rather vague change to the MPC’s remit announced in yesterday’s Budget, the ball is now back in the Bank of England’s court. But even if the Monetary Policy Committee decides to follow the US Fed in providing threshold-based forward-looking …
21st March 2013
While yesterday’s Budget resulted in a net giveaway to consumers, it did little to reduce the blow to household incomes which will be inflicted by further waves of austerity in the coming years. … Budget measures amount to small beer for …
February’s retail sales figures provided some positive news after the gloom of yesterday’s Budget. Meanwhile, the latest public finance figures gave some support to the OBR’s judgement that public borrowing this year will just about manage to edge down a …
While March’s MPC minutes revealed that the three members who voted for more QE last month remained on their own in calling for more stimulus, we continue to think that the Committee will do more before long. … MPC Minutes (Mar.) & Labour market …
20th March 2013
UK CPI inflation broke its recent stable run to rise from 2.7% to 2.8% in February. Inflation is likely to pick up further in the near-term. However, the MPC has indicated that it will “look through” this rise and the Chancellor may announce a change to …
19th March 2013
With the news last week of falls in industrial and construction output, talk of a “triple-dip” recession is back in the headlines. It’s still early days, but even with some signs that March will turn in a better economic performance, the economy will …
18th March 2013
Investors have become increasingly worried about the inflation outlook. 10-year break-even rates (which reflect expectations for RPI inflation) have risen to 3.4% – their highest rate since September 2008. While this partly reflects investors pricing in …
13th March 2013
Further measures to boost homebuilding will reportedly form part of next week’s Budget. But past attempts have had little success. So what more could the Chancellor do, and with what effect? … Budget 2013 – Can the Chancellor kick-start …
The UK’s impressive employment performance has been driven in large part by a dramatic rise in employment among elderly people. This is a desirable development in light of the UK’s ageing population and should have positive fiscal consequences. But …
Two new inflation measures, CPIH and RPIJ, are being introduced this month. A switch in the targeted measure of inflation could be part of any shake-up of the monetary framework, although it is likely to have less effect on the MPC’s policy decisions than …
12th March 2013
January’s official industrial and trade figures suggested that the economy is still struggling to rebalance and indicated that the risk of a further contraction in GDP in Q1 remains high. … Industrial Production & Trade …
Sterling’s fall has clouded the outlook for retailers’ profits by pushing up import prices. However, their profitability should still improve over the next year or two thanks to the fading of other cost pressures. … What impact will sterling's drop have …
Don’t expect much from the Budget was the message that came through loud and clear from David Cameron’s speech last week. And barely ten minutes before the Prime Minister spoke, the MPC announced it was leaving its QE programme on hold. The Government may …
11th March 2013
Although the Monetary Policy Committee (MPC) left policy on hold again today, we expect that it will not take much to swing a majority of members in support of more stimulus in the near future. While this will probably, in part, take the form of more …
7th March 2013
