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With all of the house price data relating to August released so far reporting month-on-month falls, the evidence of renewed weakness in prices is building. Admittedly, it is too early to draw firm conclusions. But with the economic recovery stalling, we …
8th September 2011
The economic data have weakened markedly and across the board over the last month. A weighted average of the CIPS surveys is now consistent with GDP falling on a quarterly basis again. Low consumer confidence continues to point to falls in real household …
7th September 2011
Last month’s dovish Inflation Report, the about-turn of previous would-be rate hikers and the generally gloomy tone of recent news on the global and UK economies have pushed any remaining prospect of tighter monetary policy even further into the distant …
6th September 2011
August’s CIPS/Markit report on services suggested that growth in the largest sector of the economy has slowed sharply – and has perhaps even turned negative. We continue to expect virtually no GDP growth in the rest of this year (resulting in annual GDP …
Last week’s bank lending data underlined the likelihood that ongoing constraints on the supply of lending and credit to business and households will continue to act as a major hindrance on the pace of economic recovery over the coming quarters. … Lack of …
August’s CIPS/Markit report on manufacturing brought further evidence that the slowdown in the global economic recovery is starting to hit the UK manufacturing sector hard. … CIPS/Markit Report on Manufacturing …
2nd September 2011
August’s drop in average house prices may be little more than noise in the broadly flat trend seen in recent months. But with the recovery faltering and consumer confidence weakening it could also signal the start of a renewed period of house price falls. …
The last quarter has seen UK markets respond to signs that the economic recovery is slowing as well as fears that policymakers are relatively powerless to provide additional monetary or fiscal stimulus to the economy. The turnaround in view has been …
1st September 2011
Monetary indicators continue to suggest that underlying inflationary pressures are pretty weak. Meanwhile, firms have continued to pay down their debts, suggesting that business investment is unlikely to support the economic recovery in the coming months. …
31st August 2011
Hopes were raised last week that the manufacturing recovery, which had been slowing since the spring, might have regained a bit of pace in August. We are not so convinced, however, that the manufacturing sector is over the worst, for three reasons. … Is …
30th August 2011
House prices are likely to end 2011 in line with, or marginally lower than, last year. That will do little to alleviate the extent to which housing is overvalued. Against this backdrop, and with the economic outlook characterised by weak growth and …
27th August 2011
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 …
26th August 2011
Creating more favourable conditions for private sector investment is just one of the ways in which the Government could help the economy to survive the fiscal squeeze without actually rowing back on its austerity plans. But with the recovery already …
25th August 2011
Last week’s flurry of data releases underlined the mounting pressures on households’ finances. These pressures only look set to intensify in the coming months as inflation rises further and unemployment continues to rise. … Rising inflation and …
23rd August 2011
20th August 2011
The outlook for consumer spending is perhaps the gloomiest it has been since the darkest days of the recession. Consumer confidence dropped to near rock-bottom levels in July. It probably even fell further in August, driven down by the drop in equity …
19th August 2011
Ireland’s robust rebound in economic output so far this year does not appear to have meaningfully improved the health of Dublin’s commercial property occupier markets. Although rents may now have stabilised, it will be some time before they begin to …
The latest regional indicators suggest that the North-South economic divide has continued to widen, with a pick-up in output growth in the South – particularly in London – failing to broaden out to the northern regions of the UK. That said, recent labour …
18th August 2011
August’s MPC minutes and the latest labour market data strongly supported the markets’ (and our own) assumption that interest rates will remain on hold for at least the next couple of years. … MPC Minutes (Aug.) & Labour market …
July’s consumer prices figures confirmed that June’s surprise drop in CPI inflation was just a blip. But the fact that the rise last month was driven by a pick-up in the core rate does not mean that inflation will be slow to fall next year. … Consumer …
17th August 2011
It is often assumed that the fiscal squeeze is driving the current weakness of consumer spending and that government measures – such as a VAT cut – are all that are needed to get the consumer recovery back on track. But real pay began to fall long before …
16th August 2011
The downgrade of US sovereign debt and speculation that France might be next has prompted renewed questions over the UK’s own credit standing. While a UK downgrade is not an imminent threat, it is certainly a possibility further ahead if, as we expect, …
The sharp 15% or so fall in UK equities over the last month appears to have reflected a combination of both fading hopes of economic recovery and concerns that policymakers are relatively powerless to provide the global economy with further monetary or …
12th August 2011
The recent fall in UK equities seems a bit overdone relative to the news on the domestic economy. Nonetheless, UK equities may continue to struggle if risks build in the global financial system. … Bounce in UK equities unlikely to …
11th August 2011
July’s consumer prices figures confirmed that June’s surprise drop in CPI inflation was just a blip. But the fact that the rise last month was driven by a pick-up in the core rate does not mean that inflation will be slow to fall next year. … Bank of …
The further falls in the markets earlier this morning were followed by yet more disappointing news on the UK’s economic recovery. The recovery was already struggling, but the recent market mayhem has increased the risks that the economy actual relapses …
10th August 2011
The possible adverse effects of the recent sharp fall in equity prices on confidence and consumers’ wealth have increased the risks that the economy starts to contract again. While our central expectation is for the economy to keep growing in the quarters …
9th August 2011
The mayhem in the markets last week has set a gloomy backdrop for the Bank of England’s Inflation Report published this week. … Market mayhem sets gloomy backdrop for Inflation …
The latest batch of producer prices figures showed that cost pressures are finally close to peaking in the industrial sector. … Producer Prices …
6th August 2011
The latest rise in house prices in July will be seen by some as a sign that the market has found a new equilibrium. However, increasingly downbeat news regarding the wider economy and the fact that house prices are still at historically high levels, mean …
The MPC’s decision to re-launch its quantitative easing programme today confirms that the Committee finally recognises that the major threat to the UK is renewed recession, not inflation. But previous experience suggests that the positive impact on the …
5th August 2011
The improvement in July’s UK CIPS/Markit report on services came as a bit of a relief after the recent run of poor data on the economy and suggested that the services sector is holding up better than the industrial sector. However, the big picture is that …
4th August 2011
After the disappointing second quarter, there are few signs that the recovery has since got back on track. … Recovery still struggling …
Gilt yields have fallen sharply since February, with 10-year yields now equal to the 50-year or so low of 2.75% that they reached in March 2009. But there are good reasons to think that gilt yields will remain low and may not yet have found a floor. … …
3rd August 2011
The run of weaker news on the economic recovery has made a near-term interest rate rise even less likely than before. We expect this message to be re-iterated in August’s Inflation Report, published next week. … Risk of rate rise now pretty …
2nd August 2011
July’s CIPS/Markit report on manufacturing suggested that the industrial sector is continuing to contract, pouring cold water on hopes that a sustained recovery in manufacturing can offset weakening demand in the consumer and government sectors of the …
Q2’s meagre 0.2% rise in GDP means that the recovery still looks even weaker than that seen after the Great Depression. Of course, there is a lot of uncertainty about how much effect the various temporary factors in Q2 had. But it is hard to get …
Broad money and lending growth remained exceptionally weak in July, suggesting that nominal GDP growth is likely to ease back in time. The case for more quantitative easing is getting stronger. … Monetary Indicators Monitor …
30th July 2011
We doubt that the rise in the number of mortgage approvals marks the start of a recovery in housing market activity. Hence, with the benefits of low interest rates being relentlessly eroded by the rising cost of living, the recent stability of house …
July’s CBI Industrial Trends survey suggested that manufacturing output has failed to bounce back after the sequence of disruptions that dragged it down in the second quarter. Accordingly, the survey added to other evidence tentatively suggesting that …
28th July 2011
Q2’s GDP figures show that the economy is still barely growing. Admittedly it is hard to know how much growth suffered from the various temporary factors dragging on output in the quarter. Nonetheless, it still looks like GDP growth this year will be …
27th July 2011
There has been a striking divergence between the two main measures of employment recently. But regardless of which is painting the more accurate picture, the labour market outlook remains poor. … Which measure of employment is …
26th July 2011
Last week started on a relatively poor note for the UK, as the nation’s banks came off rather worse than most others from the European Banking Authority’s recent round of stress tests. Admittedly, none of the four major UK banks actually ‘failed’ the …
The continued squeeze on real pay suggests that consumer spending will keep falling for some time. Last week we revised down our forecast for GDP growth this year from 1.5% to 1% and now expect consumer spending to fall by 1.5%, rather than the 1% drop we …
22nd July 2011
The official measure of retail sales rebounded a bit in June, but the underlying trend remains broadly flat. Meanwhile, “Plan A” still seems to be struggling to deliver the planned falls in public sector borrowing. … Retail Sales & Public Finances …
The continued drop in gilt yields over the last month has partly reflected the further fall in interest rate expectations as a result of the weakness of data on the UK economy. But the fall in gilt yields has exceeded the drop in rate expectations, …
21st July 2011
The minutes of July’s MPC meeting suggested that over the past month the Committee has moved even further away from raising interest rates, with most members judging that “recent developments had reduced the likelihood that a tightening in policy would be …
We now expect GDP growth of only 1% this year (compared to our previous forecast of 1.5%). We still expect growth of only 1.5% in 2012 and think that the economy will struggle to expand by more than 2% or so in 2013. Depending on how the euro-zone debt …
19th July 2011
The labour market figures are still painting a bit of a mixed picture about the strength of the jobs recovery. But with the economic recovery still struggling, we continue to expect unemployment to rise further over the next couple of years. And with real …
14th July 2011
June’s better than expected consumer prices figures brought signs that underlying price pressures might be starting to ease and, along with May’s dreadful trade figures, pushed the interest rate debate in the direction of the MPC’s doves. … Consumer …
13th July 2011
