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News last week of a record current account deficit and a sharp drop in the household saving ratio highlighted once again the failure of the UK economy to rebalance away from consumption-led growth towards exports and investment. … 'Unbalanced' growth …
1st April 2013
The minutes of March’s Monetary Policy Committee meeting suggested that those against doing more QE will not have their minds changed easily. And the remit change in the Budget ended up being fairly vague, with the key decision on forward guidance kicked …
28th March 2013
March’s still weak level of consumer confidence tallies with evidence from the CBI’s Distributive Trades survey that the consumer sector is still fundamentally quite fragile. And looking ahead, we doubt the Chancellor delivered enough in his Budget to …
The gentle recovery in household spending continued at the end of last year. However, the fact that households had to save less in the fourth quarter in order to raise their spending suggested that the recovery is still built on shaky foundations. … Rise …
27th March 2013
Those inclined to see the glass half-full have pointed out that the recovery looks healthier once you strip out the sectors that have had a disproportionately adverse effect on growth recently. However, we cannot be sure that the weakness in these sectors …
The national accounts confirmed that the UK economy finished last year on a very weak footing and kept alive the risk of a triple-dip recession. Meanwhile, the Financial Policy Committee’s statement underlined the scale of the funding challenge that lies …
March’s CBI Distributive Trades Survey was something of a mood dampener following a run of good news from the retail sector. With real pay continuing to be squeezed and little in the recent Budget to support incomes this year, this may be a harbinger of …
26th March 2013
Tomorrow’s current account figures are likely to suggest that the hoped for rebalancing in the economy is still not happening and could put some renewed downward pressure on the pound. … Is the record current account deficit a cause for …
Although the current spell of cold and snowy weather is unlikely to have lasting economic consequences, a look back to previous cold snaps suggests that it might just be enough to make the difference between GDP stagnating and falling in the first …
25th March 2013
The consensus is that George Osborne made the best of a bad hand last week. Nonetheless, this was not a Budget to get the UK recovery back on track. … Budget leaves dismal growth outlook …
While consumer spending has shown some signs of life in the first part of this year, the momentum will be difficult to sustain. Although some of the measures announced by the Chancellor in the Budget, such as the cancellation of the fuel duty rise, will …
22nd March 2013
Following the rather vague change to the MPC’s remit announced in yesterday’s Budget, the ball is now back in the Bank of England’s court. But even if the Monetary Policy Committee decides to follow the US Fed in providing threshold-based forward-looking …
21st March 2013
While yesterday’s Budget resulted in a net giveaway to consumers, it did little to reduce the blow to household incomes which will be inflicted by further waves of austerity in the coming years. … Budget measures amount to small beer for …
February’s retail sales figures provided some positive news after the gloom of yesterday’s Budget. Meanwhile, the latest public finance figures gave some support to the OBR’s judgement that public borrowing this year will just about manage to edge down a …
As expected, the backdrop to this Budget was yet another downward revision to the OBR’s growth forecasts. This downgrade strikes us as fully justified. Indeed, we are even more pessimistic than the OBR about immediate growth prospects. We are also more …
20th March 2013
While March’s MPC minutes revealed that the three members who voted for more QE last month remained on their own in calling for more stimulus, we continue to think that the Committee will do more before long. … MPC Minutes (Mar.) & Labour market …
UK CPI inflation broke its recent stable run to rise from 2.7% to 2.8% in February. Inflation is likely to pick up further in the near-term. However, the MPC has indicated that it will “look through” this rise and the Chancellor may announce a change to …
19th March 2013
With the news last week of falls in industrial and construction output, talk of a “triple-dip” recession is back in the headlines. It’s still early days, but even with some signs that March will turn in a better economic performance, the economy will …
18th March 2013
With a review of the monetary framework looking likely, policymakers should consider giving the pound a more explicit role in policy. Committing to a lower pound would not be without its costs; in the near term, consumers’ real incomes would suffer. But …
14th March 2013
Investors have become increasingly worried about the inflation outlook. 10-year break-even rates (which reflect expectations for RPI inflation) have risen to 3.4% – their highest rate since September 2008. While this partly reflects investors pricing in …
13th March 2013
Further measures to boost homebuilding will reportedly form part of next week’s Budget. But past attempts have had little success. So what more could the Chancellor do, and with what effect? … Budget 2013 – Can the Chancellor kick-start …
The UK’s impressive employment performance has been driven in large part by a dramatic rise in employment among elderly people. This is a desirable development in light of the UK’s ageing population and should have positive fiscal consequences. But …
Two new inflation measures, CPIH and RPIJ, are being introduced this month. A switch in the targeted measure of inflation could be part of any shake-up of the monetary framework, although it is likely to have less effect on the MPC’s policy decisions than …
12th March 2013
January’s official industrial and trade figures suggested that the economy is still struggling to rebalance and indicated that the risk of a further contraction in GDP in Q1 remains high. … Industrial Production & Trade …
Sterling’s fall has clouded the outlook for retailers’ profits by pushing up import prices. However, their profitability should still improve over the next year or two thanks to the fading of other cost pressures. … What impact will sterling's drop have …
With the economy still stagnating, Mr Osborne is under more pressure than ever to pull something out of the bag at the Budget on 20th March. But we doubt that he will do anything very bold on the fiscal front. So the key question is whether he will make …
11th March 2013
Don’t expect much from the Budget was the message that came through loud and clear from David Cameron’s speech last week. And barely ten minutes before the Prime Minister spoke, the MPC announced it was leaving its QE programme on hold. The Government may …
The construction sector has endured a terrible recession, with double-digit declines in output and employment. In theory, there is scope for a sharp comeback. But given the squeeze on credit and public sector building and the possibility of a shift in …
7th March 2013
Although the Monetary Policy Committee (MPC) left policy on hold again today, we expect that it will not take much to swing a majority of members in support of more stimulus in the near future. While this will probably, in part, take the form of more …
Tomorrow’s MPC meeting marks the fourth anniversary of official interest rates reaching their record low of just 0.5% in March 2009. We doubt that they will rise before the second half of 2015 at the earliest and think that some sort of rate cut is more …
6th March 2013
The economy is still flirting with a further contraction in GDP in the first quarter. Indeed, the weighted average of the three CIPS surveys in February suggested on the basis of past form that output will flatline in Q1 at best. Granted, unusually bad …
5th March 2013
The slight improvement in February’s CIPS/Markit report on services could well be the decisive factor that prevents the MPC from restarting its quantitative easing programme this week. But the business surveys are generally still at very low levels and we …
On the face of it, February’s BRC Retail Sales Monitor suggested that a resurgence in consumer spending is underway. But temporary factors can likely explain much of that month’s strong growth. At least in the near-term, sales are likely to see a return …
There is a reasonable chance that quantitative easing (QE) is resumed at this month’s Monetary Policy Committee (MPC) meeting. The Committee is taking a more flexible approach to the inflation target. Three members voted for more QE in February. And last …
4th March 2013
The second set of data on the Funding for Lending Scheme (FLS) suggested that take-up of the scheme is increasing, but that lending is not yet rising as a result. … Funding for Lending Scheme not boosting lending …
Attention last week turned swiftly from the UK’s downgrade to Paul Tucker’s comments about negative interest rates. Even if the MPC does not actually go down this route, it is heartening that even those who did not vote for more QE in February are open to …
Ostensibly, January’s household borrowing figures suggested that that the pick-up in credit growth seen in recent months is tailing off. However, the bad weather in January is likely to have played a role in dampening activity. On a more positive note, …
1st March 2013
Growth of the broad money supply turned up in January, although we suspect that seasonal effects may have played a role. Meanwhile, bank lending remains weak although it is probably still too soon for the effects of the Funding for Lending Scheme (FLS) to …
February’s CIPS manufacturing survey added to evidence that it is touch and go whether the economy has avoided entering a triple-dip recession. … CIPS Report on Manuf. (Feb.) & Mortgage Approvals …
February’s unchanged level of consumer confidence is consistent with evidence from the CBI’s Distributive Trades survey that the consumer sector is lacking momentum. Whether last week’s credit rating downgrade might knock confidence is debatable, but the …
28th February 2013
Real household spending increased unexpectedly in Q4 of last year, leaving annual growth at 1.5%, the strongest rate since Q3 2010. This rise was particularly impressive given the downward impetus to spending from the reversal of Q3’s Olympics-related …
27th February 2013
The second estimate of Q4 GDP confirmed that the economy finished 2012 on a weak footing. And with signs that activity has struggled to pick up at the start of 2013, a triple-dip recession can still not be ruled out. … GDP: Second Estimate & Expenditure …
We think the biggest falls in the pound may now be behind us. Granted, Moody’s decision to strip the UK of its AAA rating drove the currency down even further early on Monday. But sterling was fairly stable yesterday and could benefit soon from a shift in …
The sanguine market reaction to the loss of the UK’s triple-A credit rating begs the question of whether it might actually have some positive effects on the economy. But the key point is that the downgrade reflects the enormous challenges still facing the …
26th February 2013
February’s CBI Distributive Trades Survey suggested that the momentum enjoyed by retailers in the first month of the year is fading. Pressures on household budgets, not least the recent jump in petrol prices, mean that this slowdown is likely to …
Moody’s downgrade of UK government debt from Aaa to Aa1 is unlikely to prompt any major changes to the Government’s fiscal plans, but underlines the weak outlook for the economy. … Rating downgrade underlines economic …
25th February 2013
We estimate that Canada's economy grew by roughly 0.5% annualised over the entire second half of last year and is likely to perform little better over the first half of this year. Trade competiveness challenges, lower Canadian oil prices and the beginning …
Stripping out the one-off factors affecting the numbers, January’s public finances figures revealed a modest improvement on last year’s outturn. But the big picture is still that the downward progress of public borrowing has ground to a halt. … Public …
21st February 2013
While some of the pound’s recent fall probably reflects expected changes in monetary policy – the so-called “Carney short” – it has also reflected the growing view that the UK’s economic outlook is nearly as bad as the euro-zone’s. But there are reasons …
20th February 2013
February’s MPC minutes provided another clear demonstration of the Committee’s increasingly flexible approach to inflation targeting. We continue to think that more QE is only a few months away. … MPC Minutes (Feb.) & Labour market …
