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There is still little evidence of any pick-up in the growth rate of the broad money supply – supporting Mervyn King’s view that inflation will fall further ahead. Meanwhile, bank lending remains exceptionally weak. … Monetary Indicators Monitor …
29th November 2010
The sixth consecutive monthly fall in mortgage approvals for house purchase underlines the message that the mortgage market is severely depressed. We expect it to remain that way throughout 2011. … Mortgage Lending …
Last week’s bailout for Ireland did little to ease concerns about the troubled euro-zone periphery. At least the UK banking sector’s exposure to the so-called “PIIGS” – Portugal, Ireland, Italy, Greece and Spain – is a relatively modest 5% or so of total …
November’s CBI Distributive Trades Survey suggested that demand on the high street is rising at a rapid rate, perhaps reflecting early signs of a boost to spending ahead of the VAT rise on 1st January. … CBI Distributive Trades Survey …
25th November 2010
On the whole, financial markets have become increasingly optimistic about the prospects for the UK’s recovery. Interest rate expectations have begun to rise again and equities have rebounded, while inflation expectations in the bond market are now …
24th November 2010
The second estimate of UK GDP confirmed that the economic recovery was still going strong in the third quarter. But we still have deep concerns about its sustainability in the face of the immense fiscal squeeze. … GDP: Output, Income and Expenditure …
The UK gilt market appears to have suffered from a serious bout of the inflation jitters over recent weeks. Sharp rises in global commodity prices and the continued stubbornness of consumer price inflation at home have both contributed to the rise in …
22nd November 2010
Consumer spending is still recovering, but the improvement remains fitful. Spending should receive some support in the last few weeks of the year from consumers bringing forward spending ahead of the VAT rise (although some firms may have already raised …
18th November 2010
The latest UK retail sales figures suggested that the consumer spending recovery, while a bit lacklustre, hasn’t petered out yet. But another set of poor public finances cast further doubt on whether the Government will meet its fiscal forecasts. … Retail …
Concerns have grown that the Irish debt crisis could have severe consequences for the UK economy. But our impression is that any effects on the UK economy are likely to be pretty small. … What does the Irish crisis mean for the …
17th November 2010
The minutes of November’s MPC meeting and the latest labour market figures tell us little new about the monetary policy debate. The MPC remains in wait and see mode until clearer signals on the economy’s likely path emerge. … UK MPC Minutes & Labour …
October’s CPI figures could mark the start of a difficult period for the MPC. But we expect most members to hold their nerve and focus on the medium-term outlook. … UK Consumer Prices …
16th November 2010
Some of the reaction to last week’s Bank of England Inflation Report - including the 10bps or so rise in bond yields - seemed a bit over the top to us. After all, the MPC’s growth and longer-term inflation forecasts were broadly unchanged from those in …
15th November 2010
Recent market movements suggest that investors have taken the robust economic data and the decision of the Monetary Policy Committee (MPC) to hold back from restarting quantitative easing (QE) at its November meeting as signs that further monetary easing …
11th November 2010
The Bank of England’s November Inflation Report suggested that the door is still open for the Monetary Policy Committee (MPC) to follow the US Fed in extending its programme of asset purchases. … Bank of England Inflation Report …
10th November 2010
The sluggish trend in consumer confidence points to renewed weakness in consumer spending growth ahead. And sentiment yet might deteriorate further. … Fragile consumer sentiment points to spending …
9th November 2010
The UK industrial recovery, while still fairly healthy, seems to have lost a bit of pace. And the continued dismal net trade performance continues to cast a cloud over the outlook for the sector. … UK Industrial Production & Trade …
The Monetary Policy Committee’s decision not to follow the US Federal Reserve in embarking on a new bout of quantitative easing (QE) last week was justified by the recent news on the UK economy. But the game of “follow the Fed” should not be interrupted …
8th November 2010
The G20 Summit in Korea next week (11th – 12th) will be overshadowed by the fall-out from “currency wars”, hampering any attempt at the improved coordination of policies necessary to help rebalance the global economy. In particular, the US will find it …
5th November 2010
October’s UK producer prices figures won’t do a great deal to ease near-term inflation concerns. But neither should they worry the MPC too much. … Producer Prices …
The decision by the Monetary Policy Committee (MPC) not to follow the Fed in implementing more quantitative easing (QE) today no doubt reflected the stronger tone of the economic data over the past few weeks. But with the fiscal squeeze looming, limited …
4th November 2010
October’s rise in the Halifax house price index was widely expected, given the size of the previous month’s drop. Moreover, although far stronger than consensus estimates for a 0.6% rise, the underlying trend still points to accelerating house price …
October’s CIPS/Markit Report on Services continued the recent run of slightly better news on the strength of economic activity. But the recovery still appears to have slowed in the past couple of months and we continue to have significant doubts about the …
3rd November 2010
The 0.8% quarterly rise in GDP in Q3 suggested that the recovery is still progressing nicely. However, the fiscal squeeze is yet to hit – and last month’s Spending Review confirmed that overall government spending is still set to fall by about 3.5% in …
2nd November 2010
October’s UK CIPS/Markit report on manufacturing suggested that the industrial recovery has some momentum left. But there are still good reasons to think that the recovery will lose further pace in the months ahead. … CIPS/Markit Report on Manufacturing …
1st November 2010
Last week’s news that GDP is estimated to have risen by 0.8% q/q in Q3 suggested that the recovery is ticking along quite nicely. But we would not go as far as some have done in concluding that the strong rise in GDP is evidence that the Government’s …
Broad money growth still looks very weak, with the pick-up seen earlier this year now looking like a statistical quirk. This supports the view of some MPC members, including Mervyn King, that a persistent inflation problem looks unlikely. … Monetary …
29th October 2010
October’s CBI distributive trades survey suggested that retail spending is still picking up at a rapid rate, but evidence from other sources – including the official sales data – indicate that activity is much more subdued. … CBI Distributive Trades …
28th October 2010
The multitude of comments by Monetary Policy Committee (MPC) members over the past month have suggested that most are still very open to the idea of re-starting quantitative easing (QE). While the unexpectedly strong expansion of the economy in Q3 has …
The Nationwide house price index fell for the third time in four months in October. As such, the data suggest that the key question facing the market is no longer “Will house prices fall?” but rather ”How far will prices fall?” … Nationwide House Prices …
The strong revival in construction output has been a key factor behind the recent strength of GDP growth. But we doubt that the sector will continue to support the recovery from here. … Construction recovery built on fragile …
27th October 2010
The unexpectedly strong growth in the UK economy in Q3 is a welcome surprise and will probably delay a further bout of quantitative easing. But we still expect growth to slow sharply next year as the fiscal squeeze kicks in. … Preliminary GDP …
26th October 2010
Last week’s long awaited Spending Review appeared to include a moderate watering down of the planned cuts in public expenditure over the next four years. Nonetheless, an extremely onerous fiscal squeeze is still on its way. … Spending Review has not …
25th October 2010
The consumer recovery does not seem to be based on particularly strong foundations. With real incomes falling – and likely to fall further as the fiscal squeeze hits – households are having to save a smaller proportion of their income in order to keep …
21st October 2010
September’s retail sales figures provided further evidence to suggest that consumers have begun to rein in their expenditure even before the fiscal squeeze has begun. … UK Retail Sales …
In spelling out the detail of the planned cuts in public spending, today’s Spending Review underlined the challenge the Government faces to sort out the public finances. We continue to believe that the cuts, coupled with the coming tax hikes, will be a …
20th October 2010
The minutes to October’s MPC meeting provided further evidence to suggest that the Committee is moving closer to recommencing quantitative easing, while September’s public finance figures cast further doubt on the ability of the Government to meet the …
This week’s long-awaited Spending Review will do little to alter the macro-economic landscape. We already know the overall spending plans for the next five years and, while some changes to the totals are possible, they are likely to be minor. … Spending …
18th October 2010
Growing signs that the Monetary Policy Committee stands ready to recommence quantitative easing (QE) have shaped movements in sterling markets over the last month. … Markets gear up for …
13th October 2010
The labour market recovery appears to be faltering, even before the public sector job cuts really begin. We stand by our long-held view that unemployment will eventually rise all the way to 3 million, possibly by 2012. … UK Labour Data …
One explanation for the relatively small drop in employment during this recession is the muted pickup in company insolvencies. But a number of factors could prompt insolvencies to rise further, meaning that some of the fall in employment associated with …
12th October 2010
UK consumer price inflation remains stubbornly high. But that is unlikely to prevent the Monetary Policy Committee from providing the economy with further policy support should activity continue to disappoint. … UK Consumer Prices …
Given the speed with which the economic upturn has been losing momentum, last week’s data came as a big relief. But although the wider economy has, for now at least, edged away from a double-dip, GDP growth still appears to have slowed to pretty …
11th October 2010
September’s UK producer prices figures suggest that pipeline cost pressures in the industrial sector are still quite strong. But we do not expect that to prevent overall consumer price inflation from falling back over the next year or two. … Producer …
8th October 2010
