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May’s household borrowing figures show that, with households continuing to take on new debt and signs of life in the housing market, a consumer recovery may be taking root. But with real incomes falling, higher borrowing can sustain spending for only so …
1st July 2013
Today’s figures indicate that the recovery in manufacturing and mortgage lending – hitherto two of the weakest parts of the economy – is gathering steam. … CIPS Report on Manuf. (Jun.) & Household Borrowing …
Despite the recent improvement in the economic data, there is still a strong case for the new Governor Mark Carney to give the economy additional support in order to boost the chances of the recovery becoming entrenched. He might even announce something …
A number of developments last week supported our view that Mr Carney will need to give the economy more help. He might even hit the ground running by announcing something at his first meeting this Thursday, although we think it more likely that he waits …
The Nationwide reported that house prices have continued to drift gently upward, with favourable base effects helping the annual rate of growth to a 2½ year high. But price gains are not accelerating – household sector finances are simply not strong …
28th June 2013
The further slight rise in consumer confidence will raise hopes that the consumer spending recovery could be gathering momentum. But we doubt that any recovery can be sustained while real pay is still contracting sharply. … GfK/NOP Consumer Confidence …
The recent rise in interest rate expectations and gilt yields has boosted the case for Mr Carney to start on a strong note by introducing forward guidance and resuming quantitative easing. Bold action by the new Governor would help to cement any recovery, …
27th June 2013
Today’s news on the state of households’ finances shows that consumer spending is continuing to rise despite falling real incomes. But that this is only being achieved by a sharp fall in saving suggests that the recent growth may be hard to sustain. … …
The Chancellor’s efforts to engineer a sustainable, demand-led recovery in mortgage lending and housebuilding are unlikely to succeed. One possible outcome is that prices simply surge, pushing housing further beyond the reach of young and low income …
The latest GDP revisions show that the UK has further to go in terms of regaining pre-crisis levels of output than previously thought. And although the breakdown of Q1 GDP now looks a bit more encouraging, it nonetheless indicates that the recovery is …
There were virtually no changes in the overall fiscal plans in today’s Spending Review. Accordingly, the Review did nothing to alter the prospect of a prolonged period of government spending cuts. In fact, it set out only a fraction of the pain still left …
26th June 2013
This report is only available as a PDF. Click to download. … CBI Distributive Trades Survey (Jun.) …
25th June 2013
With gilt yields now at their highest level since early 2012, the growing expectation that the Fed will taper its asset purchases could boost the chances of the MPC expanding its own purchases. … Rise in gilt yields supports case for more …
24th June 2013
After losing momentum in March and April, consumer spending appears to have regained some oomph as the second quarter has progressed. … Sharing in the …
21st June 2013
The improvement in the public finances in May was due to temporary factors. In any case, with borrowing still so high, the big picture is that years of austerity still lie ahead, as will be underlined by next Wednesday’s Spending Review. … Public finances …
Next Wednesday’s Spending Review will essentially just flesh out how the cuts that have already been announced will be achieved. Nonetheless, the Government may use it to shift around its spending in a slightly more growth-friendly way. And the Review has …
20th June 2013
Continuing a recent run of good economic news, May’s rise in the official measure of retail sales will have partly reflected the fading drag from the unusually cold weather seen earlier in the year. But the underlying retail picture appears to be …
June’s MPC minutes confirmed that the outgoing Governor Mervyn King was outvoted at his final meeting and that appetite on the majority of the Committee for more policy stimulus remains muted. However, we still think that Mr Carney will usher in a new …
19th June 2013
May’s rise in inflation confirmed that April’s fall was primarily the result of some temporary factors. That said, the peak is hopefully not too far away now. … Consumer Prices & Producer Prices …
18th June 2013
The recent rise in market rate expectations highlights why Mark Carney might be keen to give reassurance that interest rates will not rise, even as the economy starts to pick up. … Rise in rate expectations boosts case for …
17th June 2013
April’s construction figures are better than they look, given that the data are not seasonally adjusted. On the face of it, they tentatively suggest that construction could help the economic recovery in the second quarter – even if that is just by …
14th June 2013
A tentative pick-up in tax receipts has lent some support to the growing signs of economic recovery. While the improvement is so far modest, tax revenues tend to lag changes in economic activity, so any improvement at this stage should be seen as a good …
13th June 2013
The recovery in the wider economy already appears to be filtering through to the labour market, although activity is still looking weaker than a few months ago and real pay continues to fall sharply. … Labour Market Data …
12th June 2013
The Trades Union Congress grabbed headlines today with its analysis showing a dramatic drop in pay over the past five years. Although we believe the fall in wages is not quite as bad as reported, the report hammers home how tight the squeeze on living …
11th June 2013
While April’s industrial production figures were not as encouraging as recent news on other sectors of the economy, they still suggested that a modest industrial recovery is getting underway. … Industrial Production (Apr. …
Consumers have shown tremendous zeal for buying clothes over the last decade, despite the recession and the squeeze on their incomes. But they have been teased into the shops by falling prices. We think that a rebound in consumer services spending and the …
10th June 2013
The positive run of economic news continued last week. Meanwhile, the Labour party’s shift in strategy underlines that fiscal consolidation will remain a defining feature beyond the election. … Recovery looking more like the real …
Mervyn King left his last Monetary Policy Committee meeting with his wish to restart the quantitative easing programme unfulfilled and the Committee still seemingly stuck in a state of limbo ahead of Mark Carney’s arrival. Despite the recent signs of …
6th June 2013
The recovery in new car sales continues to go from strength to strength. But it is still failing to translate into a broader pick-up in consumer spending and we remain sceptical that it will do so soon. … Car sales main beneficiary of looser credit …
Signs that the economic recovery may be taking root are growing. The ONS confirmed that GDP grew by 0.3% in Q1 and May’s CIPS/Markit surveys suggest growth may have accelerated in the second quarter. Admittedly, the news from the labour market has been …
5th June 2013
With a sharp rise in May’s CIPS/Markit report on services joining improvements in the manufacturing and construction surveys, signs that a recovery in the economy may be taking root are becoming more convincing. … CIPS/Markit Report on Services …
The UK economy is at risk of following a path that is, if anything, worse than the ‘lost decades’ Japan experienced from the early 1990s. While the UK possesses some advantages Japan lacked, in some respects it is also more vulnerable to a prolonged …
4th June 2013
Together with last week’s improvement in consumer confidence, May’s stronger growth in the BRC measure of retail sales points to building momentum in the consumer sector. But with employment and earnings growth negative, the risk that this momentum …
June looks like being another month of no change for the Monetary Policy Committee. Although inflationary pressures have eased recently, the role of temporary factors means the Committee is likely to place little weight on this development. Meanwhile, a …
3rd June 2013
May’s CIPS/Markit report on manufacturing provided a tentative indication that the industrial sector’s recession might be drawing to a close. However, disappointing figures on the usage of the Funding for Lending Scheme confirmed that the near-term …
On the face of it, the rise in the GfK/NOP measure of consumer confidence in May brought further evidence that the economy has finally turned a corner. But even if confidence is now on the up, it may be some time before it feeds through into stronger …
The latest money figures suggest that the recovery is still being starved of credit and add to evidence that the Funding for Lending Scheme is having a disappointing impact on lending volumes. … Monetary Indicators Monitor (May …
31st May 2013
April’s household borrowing figures are likely to quell some of the optimism arising from the recent run of better economic news. While the Funding for Lending Scheme has continued to drive down interest rates, growth in borrowing showed only a modest …
May’s strong rise in the level of consumer confidence will raise hopes that the near-term outlook for consumer spending has brightened. But May’s reading was boosted by some temporary factors, and with both employment and earnings contracting, we doubt …
The rise in house prices recorded by the Nationwide in May could further boost the growing sense of optimism regarding the housing market. But the fundamentals are still weak, and we think much of that optimism is misplaced. … Nationwide House Prices …
30th May 2013
The fall in May’s CBI Distributive Trades Survey provides another reason to think that the retail sector has lost momentum in the second quarter. Falling employment and negative pay growth means retailers continue to face an uphill struggle for sales. … …
29th May 2013
April’s sharp fall in CPI inflation led some to quickly conclude that this would be enough on its own to prompt the Monetary Policy Committee (MPC) into action. But a closer look at the figures suggests that much of the drop reflected the timing of …
27th May 2013
The nascent recovery in consumer spending lost pace in the first quarter and there are signs that it has wilted further since. Admittedly, some of the weakness of the latest evidence reflects temporary factors – the surveys have been affected by the …
24th May 2013
Real household spending continued to support overall GDP growth in Q1, seeing its sixth successive quarterly rise. But it was the weakest rate of expansion in 18 months. And given a softer labour market, households may have had to dip into their savings …
23rd May 2013
The second estimate of Q1 GDP confirmed that the economy enjoyed some modest growth at the beginning of 2013. But it was an increase in inventories that drove expansion. Meanwhile, aspirations for ‘rebalancing’ look increasingly forlorn. And the …
While the diplomatic language of today’s IMF press conference suggested that the Fund had backed down from criticising the Chancellor’s fiscal plans, its statement proposed several initiatives to offset the drag on the economy from this year’s £10bn of …
22nd May 2013
Today’s data contained some mixed signals on the strength of the economic recovery, with retail sales slumping but with the public finances making a reasonable start to the year. … Retail Sales & Pub. Fin. (Apr.), MPC Minutes …
April’s drop in inflation has provided some welcome, albeit temporary, relief to households’ budgets. While CPI inflation still looks set to climb in the coming months, we continue to expect it to ease pretty quickly thereafter, thereby alleviating one of …
21st May 2013
In contrast to his usual gloominess at Inflation Report press conferences, Mervyn King bowed out of his final forecasting round on a much chirpier note than usual. But there is still a significant risk that the MPC is too optimistic about how quickly the …
20th May 2013
The rally in financial markets and The Pension Regulator’s more flexible stance has eased some of the immediate pressure on firms to deal with the deficits of their defined benefit pension schemes. Nonetheless, we doubt that these developments brighten …
16th May 2013
