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The OBR’s argument that the Government’s cuts have not been primarily responsible for the economy’s disappointing performance might give Mr Osborne ammunition to press on with Plan A. But even if the fiscal squeeze is not to blame for the economy’s …
22nd October 2012
Real consumer spending looks on course to have grown in the third quarter. And following some upward revisions to past spending, it could rise a touch in 2012 as a whole, compared to our previous forecast for a 0.5% fall. Nonetheless, it will struggle to …
19th October 2012
September’s better than expected public finances figures will offer some cheer for the Chancellor. Nevertheless, it still looks like borrowing in 2012/13 will overshoot the OBR’s forecast. The dilemma faced by the Chancellor over the best way to meet his …
September’s rise in the official measure of retail sales volumes suggested that consumers have loosened their purse strings a little. However, the rise partly reflected temporary sources of support. Furthermore, the outlook for spending has darkened over …
18th October 2012
In explaining the UK’s ‘productivity puzzle’ – the conundrum of a dismal GDP performance combined with strong employment growth – one possibility is that the GDP figures are understating the actual level of output. But another potential answer that has …
17th October 2012
October’s MPC minutes showed that the Committee is split over whether to do more quantitative easing (QE) once the current round of asset purchases are completed in the next couple of weeks. … MPC Minutes (Oct.) & Labour Market Data …
Today’s consumer prices figures brought the news that RPI inflation in September – the rate which will be used to uprate business rates next April – was 2.6%. While this will be another chunky rise in rates which will cost retailers about £200m, we expect …
16th October 2012
September’s fall in inflation took it within a whisker of its 2% target. Although this is likely to be the last drop for a while, we still expect the weakness of the economy to pull inflation significantly below 2% further ahead. … Consumer Prices …
At the start of next year, the MPC will have to decide what to do with those gilts purchased in its quantitative easing (QE) programme that are about to mature. We expect the Committee to maintain its current loose stance of policy by re-investing the …
Tomorrow’s inflation figures could show CPI inflation falling below its target for the first time since November 2009. And we still see scope for inflation to fall further over the next year or two. While attention is focussed on the upward pressure on …
15th October 2012
The IMF’s new economic forecasts did not tell us more than we already knew. Arguably more important was the IMF’s indication that there is some scope to ease up on the fiscal squeeze. … IMF gives Chancellor some wiggle …
This week has brought some bad news regarding the outlook for households’ disposable incomes. That said, the renewed rise in food and energy prices should be smaller and more short-lived than the other income shocks households have faced over the past …
12th October 2012
Investors seem sceptical that the recent improvement in the UK economy will last. In contrast to the rises seen in the US and Germany, equity prices in the UK have held steady. And while gilt yields have risen, this seems to have reflected a modest easing …
10th October 2012
One of the most attention-grabbing aspects of the IMF’s latest World Economic Outlook is its new, bigger estimates of the impact of fiscal consolidations on economic growth. At the very least, this might argue for shifting the composition of the …
9th October 2012
August’s weak industrial production and trade figures indicated that the underlying trend in GDP is flat at best and therefore undermined hopes that the “green shoots” of economic recovery are emerging. … Industrial Production & Trade …
September’s BRC Retail Sales Monitor provided more evidence that consumer spending may be showing some tentative signs of recovery. But whether this is the start of a sustained recovery on the high street rather than merely a temporary hiatus is more …
Last week’s CIPS activity surveys, along with the BCC’s latest quarterly survey of the UK economy, means we now have a full set of survey evidence for the third quarter of 2012. Unfortunately, the picture emerging isn’t particularly bright. In fact, …
8th October 2012
The MPC’s decision to leave policy on hold today was predictable given the absence of any major economic surprises in recent weeks. We still expect more asset purchases to be announced in November. There is a fair chance that the Committee will cut …
4th October 2012
The latest leading labour market indicators suggest that the recent recovery in private sector employment is likely to run out of steam soon. So, with job cuts continuing in the public sector, it seems as if overall employment might be near a peak. … …
3rd October 2012
The widening of the current account deficit to a record 5.4% of GDP in the second quarter put paid to any hopes of a rebalancing in the economy. The deterioration mainly reflected a deficit on the UK’s investment income balance, a sharp turn-around from …
September’s CIPS/Markit report on services was consistent with the message from the other activity surveys released earlier this week, namely of an economy which is struggling to grow. While some softening in activity in September was always possible …
The latest household borrowing indicators are similar in tone to last week’s national accounts in suggesting that weak borrowing growth is holding back any recovery in consumer spending. … Household Borrowing Monitor …
1st October 2012
On the face of it, the pick-up in the MPC’s preferred measure of broad money growth supports the Committee’s view that its asset purchases are still having a significant impact on the economy. But bank lending growth remains extremely weak and it is still …
Today’s economic data presented a uniformly weak picture of economic activity and will therefore go some way to dampening hopes that the “green shoots” of recovery are emerging. … CIPS Report on Manuf. (Sep.) & Mortgage Approvals …
The Government’s new pensions auto-enrolment scheme gets underway today. In its initial stages, the new contributions that some workers will start to pay will probably have only a modest effect on overall household saving. Nonetheless, this is just one of …
While last week brought some tentatively positive signs regarding bank lending, the news that the UK ran a record current account deficit in Q2, thanks to an investment income deficit, was less encouraging. While the pound’s recent rise and the euro-zone …
Consumer sentiment continues to be very depressed. Admittedly, the small rise in confidence in September is consistent with the pick-up in other economic indicators in recent weeks. But the underlying performance of the economy remains weak and offers …
28th September 2012
Today figures showing that household incomes grew strongly in the second quarter were a rare snippet of good news. But the figures also revealed that consumers remain more focused on repairing their balance sheets than increasing their spending. … Rare …
27th September 2012
The slight upward revision to GDP in Q2 did not alter the big picture that output is still over 4% below its pre-recession peak. We continue to expect GDP to contract by 0.5% this year and expect only a sluggish recovery thereafter. … National Accounts & …
September’s CBI Distributive Trades Survey suggested that sales growth may have picked up slightly. While this is consistent with some of the other tentative signs of “green shoots” in the last few weeks, we wouldn’t read too much into it. … CBI …
26th September 2012
The Bank of England’s latest Credit Conditions Survey suggested that lenders expect the Funding for Lending Scheme (FLS) to boost the availability of credit to households. However, the picture regarding corporate lending was less positive. … Credit …
The positive tone of most of the recent releases concerning economic activity have led some to argue that the “green shoots” of recovery have re-emerged. But, without wishing to downplay the improvement, we fear that there are at least three warning signs …
24th September 2012
August’s poor public finances figures have further increased the chances that the deficit will significantly exceed the level specified in the fiscal plans. … Public finances (Aug. …
21st September 2012
Following its fall in the second quarter, real household spending appears to have put in a stronger performance in Q3. Although retail sales volumes fell back a touch in August, spending on the high street is still on track to be higher than in the second …
While the Olympics appears to have created some winners and losers on the high street, August’s official figures show that the Games failed to provide an overall boost to retail spending. … Retail Sales …
20th September 2012
September’s MPC minutes did little to diminish the prospects of further policy stimulus over the coming months. We continue to expect further asset purchases to be announced at November’s meeting. … MPC Minutes …
19th September 2012
August’s fall in inflation suggests that July’s rise was just a temporary blip in a gradual downward trend. Barring a further rise in oil prices, inflation still appears to be on track to reach the MPC’s target of 2% before the year is out. … Consumer …
18th September 2012
On the face of it, the substantial improvement in the trade figures in July and the recent easing of financial market turmoil in some of the UK’s most important export markets suggests that the outlook for exports has brightened. However, a closer …
17th September 2012
The European Central Bank’s proclamation that it is prepared to buy “unlimited” quantities of peripheral euro-zone government bonds has prompted safe-haven demand for gilts to ease and sterling to slip back against the euro. Meanwhile, larger downward …
13th September 2012
The latest labour market figures revealed that employment has continued to grow, despite the underlying stagnation of output. However, we remain concerned that the labour market’s exceptional resilience will not last. … Labour Market Data …
12th September 2012
After announcing measures to support construction last week, today the Government has turned its attention to business investment. However, there appears to be little in Vince Cable’s “Industrial Strategy” to enable business investment to pull the economy …
11th September 2012
July’s trade data showed a surprisingly large improvement following June’s awful figures. But stripping out a reversal of some one-off adverse factors in June, and in light of recent survey evidence, this is unlikely to herald the start of the …
The Government has returned after the summer break clearly keen to get on the front-foot regarding the dismal state of the economy. Perhaps the most notable aspect of the raft of announcements, though, was the lack of any statement about a more …
10th September 2012
While July’s industrial figures showed that production bounced back fully from June’s drop, the sector still looks likely to struggle in the coming months. … UK Ind. Production (Jul.) & Producer Prices …
7th September 2012
The MPC’s decision to leave policy on hold today was unsurprising and may partly have reflected a desire to wait to see what comes out of today’s ECB meeting. We still expect more asset purchases to be announced in November and think that the Committee …
6th September 2012
Of the raft of policies announced since the Government returned after the summer break, today’s measures to boost house-building are perhaps likely to have the biggest economic impact. That said, they are unlikely to be enough on their own to get the …
The poor run of public borrowing figures and growing calls for the Government to do more to support the economy have intensified the fiscal dilemma facing the Chancellor. … Latest figures compound fiscal …
5th September 2012
August’s CIPS/Markit report on services (due tomorrow, but accidentally released early) brought some good news. Nevertheless, some bounce-back in activity in August was always possible given the Olympics and following the poor weather in July. And the big …
4th September 2012
August’s BRC Retail Sales Monitor provided more evidence that the Olympics did not provide a hoped for boost to spending. Looking ahead, factors including higher petrol prices are likely to keep a lid on high street activity. … BRC Retail Sales Monitor …
With the £50bn of extra asset purchases announced in July still underway, there is no immediate pressure on the MPC to do more this month. Nonetheless, the increasing sense of gloom about the UK’s dismal economic performance has increased pressure on …
3rd September 2012
