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The MPC looks unlikely to do anything more while the asset purchases which began in October are still underway, especially given the recent slight improvement in the economic data. However, we doubt that the news has been strong enough to stop the MPC …
9th January 2012
The start of the new year has brought the good news that the UK might just about have managed to avoid falling back into recession at the end of 2011. However, we think that it would be premature to conclude that the recovery is back on track. … Is the …
Today’s data from Halifax show that house prices fell in four of the final five months of 2011. With the economy set to re-enter recession and the recent rise in unemployment having much further to run, further price falls in 2012 look more than likely. … …
6th January 2012
The economic recovery appears to have regained some momentum at the very end of last year, with the business surveys improving in December. But the outlook for this year still looks bleak. … Economic gloom lifts a …
5th January 2012
December’s CIPS/Markit report on services echoed the manufacturing and construction surveys already released in suggesting that the recovery regained some momentum at the very end of last year. However, we expect this to be short-lived – not least because …
The boost to the narrow money supply from QE2 is yet to feed through into a more meaningful pickup in the broader monetary aggregates. … Monetary Indicators Monitor …
4th January 2012
France is spearheading a drive to push ahead with a “Tobin tax” on financial transactions in Europe, even though the UK has ruled out taking part. If a comprehensive tax were introduced, the potential boost to the UK’s financial services sector as …
3rd January 2012
The improvement in December’s UK CIPS/Markit manufacturing survey got the data flow at the beginning of 2012 off to a relatively good start, but hardly suggested that the industrial recovery is back on track. … CIPS/Markit Report on Manufacturing …
Consumers finally appear to have opened their wallets in the last few days. However, the big picture is that the economy has ended the year on a pretty weak note. The consensus expects an expansion in output of about 0.5% next year, but we anticipate a …
22nd December 2011
The minutes of December’s MPC meeting reiterated the Committee’s view that there is little point in trying to fine-tune policy, but nonetheless suggested that the door remains open to more quantitative easing. … MPC Minutes (Dec.) & Public finances …
21st December 2011
Diplomatic relations between the UK and Europe worsened again last week following suggestions by French officials that the ratings agencies should be turning their attention to the UK rather than France. But while the fiscal and economic indicators in …
19th December 2011
The high street had been weathering the economic slowdown well, but the last few weeks have seen retail spending start to soften. … A soft start to the festive …
15th December 2011
The official retail sales figures confirmed that November was a bad month for retailers and will raise concerns that spending will be soft over the festive period. … Retail Sales …
The new annual regional data suggest that the widely-held view that London’s economy has fared better than other regions of the UK over the last couple of years is unfounded. … Regional Monitor …
14th December 2011
Unemployment is still rising – and would be increasing far more rapidly were it not for large numbers of workers becoming self-employed. We expect unemployment to rise much further as the economy relapses into recession. … Labour Market Data …
UK gilt yields have continued to fall over the last month, despite growing fiscal fears and the limited boost to gilt prices provided so far by the Monetary Policy Committee’s further round of asset purchases. The cost of insuring against UK sovereign …
13th December 2011
November’s inflation figures provided further hope that inflation has now passed its peak and could soon fall pretty sharply. Give it a year, and the prospect of deflation could be the prime concern again. … Consumer Prices …
David Cameron’s decision to pull away from Europe has called into question the UK’s entire future in the European Union. But when it comes to the UK’s near-term growth prospects, the debate over whether or not the Prime Minister was right to exercise his …
12th December 2011
The high street has been emitting an unrelenting flow of gloomy news in recent weeks. We are reluctant to conclude just yet that Christmas trading will be a total write-off. Nevertheless, a splurge before Christmas would probably only lead to a very weak …
Given that the £75bn of asset purchases announced in October has not been completed yet, today’s decision by the MPC to leave policy unchanged was unsurprising. However, the Committee has sent some strong signals that further quantitative easing (QE) is …
9th December 2011
8th December 2011
The Chancellor has frequently claimed that his commitment to fiscal austerity has earned the UK credibility in financial markets and has been the decisive factor behind the fall in gilt yields. But the Chancellor’s fiscal stance has been just one of a …
7th December 2011
October’s official UK industrial production figures were even weaker than we or the consensus had expected and suggested that the risk that the overall economy re-enters recession in the fourth quarter remains high. … Industrial Production …
This month’s fall in the Halifax house price index was hardly a surprise given other recent, downbeat economic news. And with the labour market weakening rapidly and the economy on the brink of recession, the downside risks to house prices have …
6th December 2011
The MPC has sent some strong signals that further quantitative easing (QE) is likely before long. However, the £75bn of asset purchases voted for in October have not been completed yet. And the Committee has indicated that it would prefer to finish them …
5th December 2011
The modest improvement in the UK CIPS/Markit report on services in November does not alter the big picture that the overall economy is verging on recession. … CIPS/Markit Report on Services …
We doubt when he created his fiscal framework that the Chancellor ever imagined quite what a straitjacket he was creating for himself. At a time when he is under pressure to slow down his austerity measures, he has ended up having to beef them up further. …
We have revised down our forecasts for GDP growth and now expect a contraction in 2012 as a whole of 0.5% (our previous forecast was zero growth) and growth of just 0.5% in 2013 (down from 1.5%). The OBR and Bank of England also recently revised down …
2nd December 2011
The Bank of England’s Financial Stability Report (FSR) suggests that a second credit crunch might already be starting to hit the UK. A renewed tightening of credit conditions is just one reason to think that the UK is heading back into recession. … FSR …
1st December 2011
November’s CIPS/Markit report on manufacturing added to the growing mass of evidence suggesting that the UK economy is heading back into recession. … CIPS/Markit Report on Manufacturing …
Despite further large falls in gilt yields and little overall change in equity prices over the last quarter, we doubt that markets have fully appreciated the likely impact of the euro-zone debt crisis on the UK economy. Indeed, if the recession that we …
30th November 2011
The Nationwide house price index remains surprisingly resilient in the face of falling confidence and weak mortgage demand. But with the labour market now deteriorating rapidly, the balance of risks around the house price outlook are heavily skewed to the …
29th November 2011
Credit easing marks an important step forward in the Government’s efforts to tackle the lack of bank lending. But it is unlikely to transform the near-term outlook for corporate lending. … Credit easing an important step, but no quick …
28th November 2011
Economic growth in the third quarter was driven by stockbuilding and government spending, neither of which is the basis for a sustained recovery. Indeed, the more forward-looking indicators suggest that the economy has already relapsed and we still think …
24th November 2011
The minutes of November’s MPC meeting supported last week’s dovish Inflation Report in suggesting that a further extension to the quantitative easing (QE) programme is not far off. More QE in February still looks likely. … MPC Minutes …
23rd November 2011
October’s public finance figures provided the Chancellor with some relatively good news ahead of next week’s Autumn Statement. But the deterioration in the prospects for economic growth (and hence borrowing) in future years mean that he will have no scope …
22nd November 2011
The Government was lambasted last week for blaming the UK’s poor economic performance on events in the euro-zone. While the Government might have jumped the gun a bit, it won’t be long before the impact of events across the Channel becomes painfully …
21st November 2011
The unprofitable sale of Northern Rock should dent any hopes that the Government will be able to sell profitably its remaining stakes in the other nationalised banks in the near future. … Little cause for cheer on Northern Rock …
17th November 2011
The consumer sector remains in a poor state. We continue to expect real household spending to fall by about 3% over the next two years. … Labour market downturn …
The gap between the cost of Brent crude and the traditional US benchmark, West Texas Intermediate (WTI), is finally closing, but the episode has been another example of how speculative pressures can drive commodity prices well away from levels that can be …
The latest regional activity surveys suggest that the southern regions of the UK have borne the brunt of the economy’s recent weakness. But there are signs that the North’s outperformance will be temporary. … Regional Monitor …
16th November 2011
November’s Bank of England Inflation Report clearly paved the way for a significant further extension of the MPC’s asset purchase programme. … Bank of England Inflation Report …
The latest employment figures showed that the labour market is continuing to deteriorate rapidly. We still think that ILO unemployment will rise above the 3 million mark within the next couple of years. … Labour Market Data …
Fingers crossed, October’s drop in inflation should mean that we have now passed the peak in inflation. The start of 2012 should see inflation begin to fall back sharply and we think that it will be below the 2% target within a year. … Consumer Prices …
15th November 2011
With the euro-zone crisis entering a far more dangerous phase last week, the threats posed to the UK from overseas are looming ever larger. September’s trade data, showing a sharp drop in export volumes to the EU, suggested that the euro-zone crisis has …
14th November 2011
October’s producer prices figures are likely to mark the start of a major downward trend in input price inflation and also underline the competitive pressures bearing down on manufacturers’ pricing power. … Producer Prices …
11th November 2011
10th November 2011
While the twists and turns of the euro-zone debt crisis have continued to have a key bearing on UK market movements, markets also appear to be concerned that the UK economy is on the brink of recession. A strong rally in equities in October was partly …
9th November 2011
September’s trade figures suggested that the UK is already suffering the adverse effects of the euro-zone crisis. And the worst is yet to come for exporters. … Trade …
