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The Monetary Policy Committee (MPC) is unlikely to take any action this month. After all, it is still justifying why it did nothing last month! But the Committee has left the door firmly open to a further extension of its programme of quantitative easing …
25th February 2010
The argument over whether Labour’s National Insurance rise or the Conservatives’ efficiency savings will cost more jobs detracts from the bigger picture that the required fiscal squeeze will result in the loss of up to 750,000 public sector jobs over the …
Recent migration figures suggest that immigration into the UK has slowed sharply, while the number of migrants leaving the UK has risen. We think that net migration flows are now back to, or even below, the levels seen before the EU expanded in 2004. … As …
The new year got off to a very weak start. Admittedly, temporary factors played some part in this. Not only did the snow discourage spending, but consumers may have pulled forward purchases of bigticket items to the end of last year in order to beat the …
22nd February 2010
Last week was clearly one to forget in terms of news on the UK economy. Inflation rose to a 14 month high, unemployment resumed its upward trend, bank lending weakened, retail spending collapsed and January’s public finances figures drew comparisons …
The UK has not been alone in seeing inflation rise recently, prompting the Monetary Policy Committee (MPC) to suggest that common factors may therefore be keeping inflation high globally. However, a closer look suggests that the overseas inflation picture …
18th February 2010
January’s UK public finances figures suggested that this year’s budget deficit could exceed that of Greece and further underlined the need for more decisive action to improve the fiscal position when the economy is strong enough to withstand it. … Public …
While the recent rise in consumer price inflation has been driven by temporary factors such as the VAT hike and higher energy prices, one potentially more persistent influence is the rapid growth of unit wage costs. But this is unlikely to prevent …
17th February 2010
The minutes of February’s Monetary Policy Committee (MPC) meeting suggested that the pause in the Committee’s quantitative easing (QE) programme may be only temporary. If the recovery disappoints – and the latest labour market figures were hardly …
January’s consumer prices figures should provide some reassurance that, behind the special factors currently pushing inflation higher, underlying price pressures in the UK economy remain pretty subdued. … UK Consumer Prices …
16th February 2010
It has been suggested that central banks are already effectively tightening policy by withdrawing the emergency liquidity provided to the financial system during the depths of the crisis. But in the UK’s case, most of the support is actually still in …
15th February 2010
Last week’s Inflation Report was always likely to show a downward revision to the MPC’s growth forecasts and it duly delivered. But less certain was whether the recent rise in inflation would have shaken the MPC’s belief that a large amount of spare …
Greece is the word in the financial markets at the moment. But aside from the potential for weak puns like that (“Greek tragedy”, “acropolis now” etc.), what do recent developments there mean for the country itself, for the European single currency and …
12th February 2010
In yesterday’s Inflation Report, the Bank of England highlighted the uncertainties surrounding the amount of spare capacity in the economy. Indeed, the recent stubbornness of UK inflation has led to concerns that, despite the deep recession, there is only …
11th February 2010
The distinctly dovish tone of the Bank of England’s February Inflation Report begs the question of why the Monetary Policy Committee (MPC) did not implement a further extension of its quantitative easing programme last week. But the door to further policy …
10th February 2010
December’s UK industrial production figures raised hopes that industry made a stronger contribution to GDP growth in Q4 than previously thought. But that does not alter the big picture of a very sluggish economic recovery. … UK Industrial Production …
Further changes to VAT are an appealing option for improving the fiscal position. But by pushing inflation even higher and perhaps limiting the scope for offsetting monetary support, excessive increases could have particularly damaging consequences for …
9th February 2010
The MPC’s decision to pause its quantitative easing (QE) programme has intensified the debate about whether it is the stocks or flows of asset purchases that matter most for the economy. The answer is probably both. But regardless of how QE is working, …
8th February 2010
Several recent developments appear to have cast some doubt over the likelihood and size of the widely expected post-election tightening of fiscal policy. Recent opinion polls have raised the chances of a hung parliament, while the Conservatives seem to …
There are worries that a hung parliament could lead to higher interest rates and a lower credit rating – a nasty scenario for sterling assets. But with monetary policy set to remain extremely loose and a strong cross-party consensus for fiscal restraint, …
4th February 2010
The Monetary Policy Committee’s decision not to extend its quantitative easing programme further this month does not necessarily mark the end of its extraordinary efforts to support the economy. And any tightening of policy conditions remains a long way …
Halifax data for January confirmed that the housing market upturn was extended into 2010, but also indicated that it may be losing steam. Indeed, prices rose at their slowest rate since June. Admittedly, this is in stark contrast to last week’s Nationwide …
This report is only available as a PDF. Click to download. … Halifax House Price Index (Jan) …
We estimate that the car scrappage scheme has boosted UK GDP by just 0.1% or so per quarter. Nonetheless, the end of the scheme could still dent growth if consumers brought forward spending to take advantage of the scheme. And the expiry of overseas …
January’s CIPS/Markit report on services suggested that the economic recovery is struggling to maintain even the meagre momentum it built up at the end of last year. … UK CIPS/Markit Report on Services …
3rd February 2010
The UK finally emerged from recession in the last quarter of last year, but by the skin of its teeth. GDP posted a quarterly rise of just 0.1%, comparing poorly to the initial rises in output seen in other economies when they recently exited recession. …
2nd February 2010
It has now been almost a year since the Bank of England started its quantitative easing (QE) programme of asset purchases, yet both the broad money supply and bank lending are still barely rising. … Monetary Indicators Monitor …
1st February 2010
January’s CIPS report on manufacturing offered hope that the industrial recovery is gathering momentum. But there are still major uncertainties over the outlook for the overall economy over the coming quarters. … CIPS/Markit Report on Manufacturing …
It was bad enough that the UK was one of the last major economies to pull out of recession, but we also now know that it saw a particularly feeble post-recession bounce. One reason is that big exporters such as Germany are enjoying a temporary boost from …
The upward momentum in house prices evident at the end of last year was extended into January. Indeed, the Nationwide house price index rose at its fastest rate for four months. But with each rise denting affordability and making it harder for buyers to …
29th January 2010
This report is only available as a PDF. Click to download. … Nationwide house prices (January) …
The Monetary Policy Committee (MPC) faces a particularly tricky task when it meets this month. On the one hand, the economy only just limped out of recession at the end of last year. But on the other, inflation is rising more sharply than expected. On …
28th January 2010
Q4’s disappointing GDP figures have raised fresh questions over the possibility of a “double-dip” in the economy and the implications for the timing and outcome of the forthcoming general election. … Will a “double-dip” sink Mr …
Consumer spending could continue to strengthen in the next few months. But this should be short-lived. We still anticipate several years of consumer weakness. … Near-term momentum to fade as the year progresses (Q1 …
27th January 2010
The meagre 0.1% rise in GDP in Q4 showed that the UK is still lagging behind in the global recovery stakes. We think that the UK will fall even further behind over the next year or two. But further ahead, we see no reason why the UK cannot return to being …
The UK economy finally exited recession in Q4 last year, but at a snail’s pace. With households under pressure, credit in short supply and a fiscal squeeze looming, the path back to pre-recession levels of activity will be a long and bumpy one. … …
26th January 2010
This report is only available as a PDF. Click to download. … How will the election influence economic policy? …
25th January 2010
The pound’s recent climb to a four month high against the euro has revived memories of sterling’s major appreciations ahead of the last two changes of government back in 1979 and 1997. We do not envisage a sterling rally on the same scale, if only because …
As we expected, consumer spending picked up pace towards the end of December. Not only do consumers tend to do their Christmas shopping later and later, but the VAT rise encouraged them to bring some spending forward. That said, the modest rise in the …
22nd January 2010
December’s modest rise in the official measure of retail sales was disappointing given the far more upbeat tone of the surveys and trading updates. Although the figures should not be taken as gospel, they were a timely reminder that UK consumers should …
December’s public finances figures will do little to ease the pressure for a major fiscal tightening after the general election. But at least the manufacturing sector finally seems to be benefiting from the lower pound. … Public Finances & CBI Industrial …
21st January 2010
While analysis of the influence of the general election on economic policy has focused on the size and timing of the fiscal tightening, the conduct of monetary policy could also be affected. But whatever the election outcome, we expect monetary policy to …
20th January 2010
The minutes of January’s Monetary Policy Committee (MPC) meeting suggested that the Committee is unlikely to change policy either way next month. Meanwhile, the mixed labour market data highlighted the fragile nature of the economic recovery. … MPC …
December’s consumer prices figures will clearly do nothing to ease the recent increase in inflation worries. But they should not throw the Monetary Policy Committee into a blind panic. … UK Consumer Prices …
19th January 2010
