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Halfway through the parliament, the coalition’s fiscal plans are showing sizeable cracks. But any changes to the plans are likely to be modest, maintaining the need for strong monetary support. … Are the Government’s fiscal plans …
19th February 2013
Recent developments have darkened the outlook for inflation and therefore imply that the squeeze on real pay is likely to persist to the very end of 2013. The recent rise in oil prices suggests that petrol prices will rise by around 3% in February. And …
18th February 2013
We are approaching the fourth anniversary of official interest rates reaching a record low of just 0.5% in March 2009 and concerns have been growing about the damage caused by such a prolonged period of low interest rates. However, raising interest rates …
The MPC demonstrated quite clearly last week that it doesn’t have to wait for the new Governor to arrive to put flexible inflation-targeting into action. But Mervyn King continued to sound defeatist about what else monetary policy can do, suggesting that …
The anchoring of inflation expectations is seen as one of the great successes of the current inflation targeting regime and is enabling the MPC to take a more flexible approach to meeting the target. But there are signs that the anchor is starting to …
15th February 2013
January’s surprise fall in the official measure of retail sales volumes has brought the recent run of better economic news to an abrupt end. While most of this weakness appears to have reflected the impact of the month’s particularly heavy snow, the …
Today’s figures from the ONS highlight how employees’ real earnings have fallen to levels last seen in 2003. And the Bank of England’s February Inflation Report suggested that the squeeze on households’ real pay will continue for the next two years. … …
13th February 2013
The Bank of England has presented another gloomy Inflation Report, showing inflation projected to be stronger over the next couple of years even though the recovery is still expected to be sluggish. But the MPC showed that it is already taking the …
Inflation held at 2.7% for the fourth month in a row in January and is likely to rise further before falling later this year. Tomorrow’s Inflation Report will paint a nasty picture of weak growth and above-target inflation for much of the next two years. …
12th February 2013
Mark Carney suggested last Thursday that, rather than changing the monetary framework altogether, introducing more flexibility into the existing inflation-targeting regime is his preferred option. The MPC is already taking a pretty flexible approach to …
11th February 2013
The continued strength of inflation, resulting in further falls in households’ real pay, raises the question of whether we can ever look forward to a period when it finally eases and so supports rather than scuppers growth. We continue to think that there …
The MPC took the unusual step of issuing a detailed statement alongside its no-change decision last week. It may be that the Committee viewed its decision to reinvest its gilts that mature next month as a policy move that required explanation, especially …
Not only did the Monetary Policy Committee (MPC) leave policy on hold again today, but in his testimony to the Treasury Committee, Governor-to-be Mark Carney sounded less keen than before on a change in the monetary framework. Nonetheless, he was keen at …
7th February 2013
December’s industrial production and trade figures added to evidence that the economic picture improved at the tail end of last year. But the fact that the trade deficit for the year as a whole reached a record high underlines that these improvements are …
Consumers will have to endure a further tough year. We no longer expect consumer spending to rise at all in real terms in 2013. But a recovery should start next year. … Another tough year to get …
6th February 2013
As part of the question of how monetary policy can support the economy further, attention is turning to whether the policy framework might need to be reformed. A new framework won’t solve the UK’s problems on its own. But the current one could certainly …
The contraction in GDP in the final quarter of last year means that the economy may have entered a triple-dip recession. This downturn now looks even more dismal by previous standards. Admittedly, the economy was pulled down by temporary factors, …
5th February 2013
January’s BRC Retail Sales Monitor suggested that retailers managed to escape relatively unscathed from the bad weather in the middle of the month. But with consumer confidence still low and real pay falling, it seems unlikely that the high street can …
January’s CIPS/Markit report on services echoed the other data released in recent days suggesting that the economy has been doing a bit better since the start of the year. But while there is tentative hope that a triple dip may be avoided, there are still …
The UK car industry’s revival shows that it is possible for parts of the manufacturing sector to recover despite weakening demand from the euro-zone. … Car industry shows exports can grow despite EZ …
Although a strong case could be made for resuming quantitative easing (QE) at this month’s Monetary Policy Committee (MPC) meeting, the Committee has given no indication that it is on the cusp of doing more. But the MPC may announce that it is reinvesting …
4th February 2013
Last week, the pound continued to depreciate, capping off the sterling trade-weighted index’s largest drop over a calendar month since February 2010. Sterling’s weakness against the euro seems partly to reflect the markets’ willingness to look beyond …
January’s CIPS report on manufacturing supports other evidence that any upturn in industrial output at the start of the year will be short-lived. … CIPS/Markit Report on Manufacturing (Jan. …
1st February 2013
Companies represent the one sector of the economy which has the means to spend more and so kick-start a recovery. But we are doubtful whether this sector has the motive. A number of factors will continue to act as obstacles to a business-led recovery, not …
31st January 2013
Today’s news that house prices started the year with a modest rise provides some further evidence that the housing market is starting to respond to Government efforts to kick-start the sector. But it remains to be seen if this improvement is sustainable. …
January’s modest uptick in consumer confidence is consistent with evidence from the CBI’s Distributive Trades survey that 2013 got off to a so-so start. But talk of a “triple-dip” recession following last week’s disappointing GDP numbers means sentiment …
Growth of the broad money supply is still quite strong, but it is heading in the wrong direction. Meanwhile, the recent loosening of credit conditions has not fed through into a meaningful pick-up in bank lending yet. … Monetary Indicators Monitor …
30th January 2013
December’s household borrowing figures provided further evidence that the Funding for Lending Scheme (FLS) is having a beneficial impact on credit growth. Nonetheless, the recovery in lending is gradual and is coming from a very weak base. … Household …
While the economy may be entering a “triple-dip”, employment growth continues to be surprisingly strong. A look at which sectors are creating jobs suggests that part of the rise in employment reflects the extra effort needed to generate additional sales. …
29th January 2013
Between 2006 and 2012 London was probably the only UK region to experience a real rise in consumer spending, of perhaps 0.7% a year. This particularly reflected growth in the financial, professional and digital sectors, boosting employment and …
28th January 2013
With the Europe issue now kicked into the long grass of the next Parliament, politicians can hopefully get back to addressing the bigger issues affecting the economy at the moment. After all, EU speech aside, last week was a pretty dire one for the …
The UK economy is contracting again. Although Q4’s drop in GDP was partly down to temporary factors, another contraction in Q1 is quite possible, meaning that the UK may now be in a “triple dip”. And we think that the underlying stagnation is likely to …
25th January 2013
One rare bright spot in the consumer sector recently has been the pick-up in spending on cars. While cars comprise a relatively small part of overall consumer spending, this could still be promising for the wider consumer sector if it shows that …
Although indicating a modest slowdown in sales growth, January’s CBI Distributive Trades Survey still suggested that retailers enjoyed a reasonable level of activity in January. But signs of optimism are, justifiably, lacking. … CBI Distributive Trades …
24th January 2013
The minutes of January’s MPC meeting suggested that the views of its members are becoming increasingly polarised, indicating that next month’s decision over whether or not to provide the economy with more stimulus will be a close run thing. … MPC mins. …
23rd January 2013
The labour market appears to have found a second wind following earlier indications that its strength was fading. But the price for this resilience is very depressed earnings growth. … Labour Market Data …
January’s CBI Industrial Trends survey suggested that the conditions required for a sustained recovery in manufacturing output this year remain absent. … CBI Industrial Trends Survey (Jan. & …
22nd January 2013
December’s public finances data ended 2012 on a disappointing note. While the deficit in the last quarter of the fiscal year will be flattered by temporary factors, including the transfer of the Bank of England’s QE fund, this will only go so far to …
The UK’s relationship with the rest of Europe was the main topic of discussion last week. Perhaps the biggest danger is that the debate over Europe distracts politicians from getting on with taking further action to get the recovery going again. … Is the …
21st January 2013
2012 seems to have ended on a fairly underwhelming note with consumers relatively cautious over the festive period. … A lacklustre festive …
18th January 2013
December’s drop in the official measure of retail sales volumes confirmed that it was a fairly lacklustre festive period for the high street and provided more evidence that the UK has slipped into a “triple-dip”. … Retail Sales …
Concerns are building that sterling is on the brink of a sharp fall. While certainly possible, it is not as inevitable as some appear to assume. And it might not be such a bad thing in any case. … Sharp fall in the pound wouldn’t necessarily be a bad …
16th January 2013
Inflation held at 2.7% in December, marking the third full year of above-target price rises. Inflation is likely to stay close to this rate in the near-term, pushing real pay down further this year. But we still expect it to drop back further ahead. … …
15th January 2013
The key message from the high street since the start of the year is that the Christmas period turned out to be pretty lacklustre. Meanwhile, the Government last week published its mid-term review and its report card on the economic and fiscal front is …
14th January 2013
It is looking pretty clear that the festive period was fairly underwhelming in terms of overall sales for the retail sector. But what do the retailers’ updates tell us of winners, losers and other trends? … The themes of the festive trading …
11th January 2013
November’s disappointing UK industrial production and construction figures provided yet more evidence that the economy probably contracted in the fourth quarter of last year. … Industrial Production …
Although the Monetary Policy Committee (MPC) left policy on hold again today, we expect to see more quantitative easing (QE) this year, as well as a possible shift towards more radical options. … More QE still in prospect (Jan …
10th January 2013
Given that the National Statistician has decided not to alter the way RPI inflation is measured, the RPI rate will continue to run above the CPI measure for the foreseeable future. However, we still expect both to fall to relatively low rates next year as …
Following Friday’s disappointing results from the CIPS/Markit report on services, November’s trade data provided another reminder that the economy is likely to have contracted in the last quarter of 2012. … Trade …
9th January 2013
We think that Scotland’s exit from the Union would be unlikely to benefit the rest of the UK and could even represent a net economic cost. The UK would probably retain some of the disadvantages of current links with Scotland, including the need to …
8th January 2013
