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It should not be long until we hear who will replace Sir Mervyn King as Governor of the Bank of England at the end of next June. It is thought that the appointment of a Bank “insider” might just lead to a continuation of the status quo. But the difficult …
21st November 2012
October’s public finance figures – the last before the Autumn Statement in a fortnight’s time – suggested that there is still a significant risk that the Chancellor will break his fiscal rules unless he introduces even more austerity. Meanwhile, the …
After enduring a series of cost shocks in recent years alongside stagnant consumer demand, retailers could be forgiven for thinking that the squeeze on their profits will never cease. Nonetheless, the outlook for costs is brighter now than it has been for …
20th November 2012
The main message from Wednesday’s Inflation Report was that quantitative easing (QE) is still the MPC’s preferred course of action when it comes to giving the economy more stimulus. … QE still at the top of the …
19th November 2012
October’s poor retail sales figures have prompted fears of a disappointing Christmas on the high street. While we doubt that it will be a write-off, we expect consumers to be cautious and retailers might end up having to step up the pace of discounting. … …
16th November 2012
Although real consumer spending probably rose in the third quarter, that could be as good as it gets for a while. … Real pay prospects …
There is at last light at the end of the tunnel for consumer demand. But while we expect some sort of recovery in consumer spending to get going relatively soon, we expect that recovery to be very sluggish. … Is consumer spending facing a lost …
15th November 2012
October’s official retail sales figures support the timelier surveys in suggesting that the recovery on the high street is losing momentum ahead of the crucial Christmas shopping season. … Retail Sales (Oct. …
Although the Bank of England’s latest Inflation Report showed inflation projected to be broadly at its 2% target at the two year policy horizon, Mervyn King’s comments at the press conference suggested that the door remains wide open to more quantitative …
14th November 2012
The latest labour market figures revealed that while employment has continued to grow, the pace of expansion is slowing. And timelier indicators suggest that the labour market’s recent resilience may finally be starting to fade. … Labour Market Data …
October’s rise in CPI inflation from 2.2% to 2.7% provided another explanation for why the Monetary Policy Committee (MPC), which would have seen the headline figures, held back from providing more stimulus last week. However, the rise in inflation is not …
13th November 2012
Some members of the MPC appear to think that they are reaching the limits of how much monetary policy can help the economy. We agree that more gilt purchases might not do a lot of good. But this just means that the Committee should get more imaginative. … …
12th November 2012
The Prime Minister may have been getting ahead of himself when he said a few weeks ago that “the good news will keep on coming”. Although Q3’s GDP figure was strong, the more recent official and survey data have been disappointing. … The shine wears …
The Government today agreed with the Bank of England to transfer to the Exchequer the excess cash held in the Bank’s quantitative easing (QE) facility. This will leave the published borrowing figures looking healthier in the near-term, but is largely just …
9th November 2012
The trade deficit narrowed in September, but the balance has recently been volatile and the underlying picture is one of little improvement. However, there were more encouraging signs in today’s mortgage interest rates data that the Funding for Lending …
The European Commission this week added to warnings that the Chancellor might miss his target for debt as a share of GDP to be falling in 2015/16. One factor influencing whether Mr Osborne decides just to break the rule is how the rating agencies would …
8th November 2012
The MPC’s decision to leave policy on hold today would not have been an easy one and the vote could have been quite close. We think that more policy stimulus will be required in the coming months – the question is whether the Committee feels it has the …
About 1 million households are currently receiving a letter from HMRC setting out how much they will lose from child benefit reforms taking effect in January 2013. While the macroeconomic impact of these reforms will be modest, the overall spending and …
7th November 2012
September’s industrial production figures supported the latest CIPS/Markit activity surveys in suggesting that the economic recovery is quickly losing momentum again. … Industrial Production …
6th November 2012
October’s BRC Retail Sales Monitor provided evidence that, following Q3’s generally positive news from the high street, a retail recovery seems to be fizzling out. … BRC Retail Sales Monitor …
The squeeze on real pay is ending but the prospect of an actual recovery now looks a bit further off. We still expect the consumer spending recovery to be very muted. … Recovery remains just out of …
5th November 2012
UK banks have now increased their provisions for compensation payments for mis-sold Payment Protection Insurance (PPI) policies to £15bn – equal to 1.5% of annual household incomes. However, we think that the boost to household spending from these payouts …
It will be a close decision at this week’s Monetary Policy Committee meeting. The latest business surveys suggest that the recovery is still struggling. But other economic data have been more positive, while inflation is likely to pick up again in the …
October’s CIPS/Markit report on services was something of a reality check to the generally positive economic news of recent weeks. Alongside last week’s disappointing manufacturing survey, it suggests that the economy is continuing to splutter. The MPC’s …
Last week brought some tentative signs that the Funding for Lending Scheme (FLS) is beginning to work. New mortgage rates have been falling and last week’s lending figures were pretty encouraging. However, the improvement remains restricted to the …
The last month has seen some tentatively encouraging news about the economy. But the good news might not last for long; the economy could contract in the last quarter of the year. … Green shoots tentatively …
1st November 2012
The deterioration in October’s CIPS/Markit report on manufacturing provided more evidence that the industrial sector is struggling and suggested that the rebound in the official measure of manufacturing output in the third quarter was only temporary. … …
Against the run of positive economic data in recent weeks, October’s decline in consumer confidence was particularly disappointing. Although GfK’s survey was undertaken before the news that the economy had emerged from recession, the likelihood of a rapid …
31st October 2012
September’s relatively positive borrowing numbers provided tentative evidence that the Bank of England’s Funding for Lending Scheme (FLS) is reducing the cost and increasing the availability of credit. But the impact of the FLS on savings rates may be …
30th October 2012
September’s CBI Distributive Trades Survey continued the run of favourable economic data seen in recent weeks. But given that real incomes will soon start to be squeezed by rising utility prices, this may only represent a temporary hiatus. … CBI …
The latest household borrowing indicators seemed to reinforce the positive news from last week’s GDP data. But in the face of continued declines in real pay, a pick-up in borrowing may be a symptom of economic weakness rather than strength. … Household …
29th October 2012
The acceleration in the MPC’s preferred measure of broad money growth supports the picture from the recent GDP figures that there has been an underlying improvement in the economy. This could help to tip the balance towards the Committee leaving policy …
In his speech last week, Bank of England Governor Mervyn King left the door open to more quantitative easing, but appeared to rule out any steps towards more unconventional policy measures, including a so-called helicopter drop of money. … King rules …
Not only did the UK pull out of its double-dip in Q3, but the 1% quarterly rise in GDP was a fair bit better than expected. However, it is hard to tell how much of this was due to temporary factors. And it certainly won’t be plain sailing from here on. …
25th October 2012
The idea of nominal GDP targeting is gaining ground in academic circles as an alternative way for policymakers to boost the struggling economy when interest rates are close to zero. The case for a switch is not clear-cut; the framework would have its pros …
A so-called “helicopter drop” of money is generally seen as the nuclear option which will boost the economy if all else fails. However, it is not necessarily the radical step that it might seem. … Is a helicopter drop the …
24th October 2012
After suffering heavily in the recession, spending in the pubs and restaurants sector is likely to recover even more gradually than overall consumer spending over the next year or two. But within this overall trend, we expect to see a continuation of the …
Today’s CBI Industrial Trends Survey for October and Q4 brought more gloomy news on the state of demand for manufactured goods. Meanwhile, Mervyn King left the door open to more quantitative easing in his speech last night. … CBI Ind. Survey (Oct./Q4) & …
There is a significant chance that the Office for Budget Responsibility judges in the Autumn Statement that the Chancellor is likely to miss his secondary target for debt as a share of GDP to be falling in 2015/16. A look back to when the last Government …
22nd October 2012
The OBR’s argument that the Government’s cuts have not been primarily responsible for the economy’s disappointing performance might give Mr Osborne ammunition to press on with Plan A. But even if the fiscal squeeze is not to blame for the economy’s …
Real consumer spending looks on course to have grown in the third quarter. And following some upward revisions to past spending, it could rise a touch in 2012 as a whole, compared to our previous forecast for a 0.5% fall. Nonetheless, it will struggle to …
19th October 2012
September’s better than expected public finances figures will offer some cheer for the Chancellor. Nevertheless, it still looks like borrowing in 2012/13 will overshoot the OBR’s forecast. The dilemma faced by the Chancellor over the best way to meet his …
September’s rise in the official measure of retail sales volumes suggested that consumers have loosened their purse strings a little. However, the rise partly reflected temporary sources of support. Furthermore, the outlook for spending has darkened over …
18th October 2012
In explaining the UK’s ‘productivity puzzle’ – the conundrum of a dismal GDP performance combined with strong employment growth – one possibility is that the GDP figures are understating the actual level of output. But another potential answer that has …
17th October 2012
October’s MPC minutes showed that the Committee is split over whether to do more quantitative easing (QE) once the current round of asset purchases are completed in the next couple of weeks. … MPC Minutes (Oct.) & Labour Market Data …
Today’s consumer prices figures brought the news that RPI inflation in September – the rate which will be used to uprate business rates next April – was 2.6%. While this will be another chunky rise in rates which will cost retailers about £200m, we expect …
16th October 2012
September’s fall in inflation took it within a whisker of its 2% target. Although this is likely to be the last drop for a while, we still expect the weakness of the economy to pull inflation significantly below 2% further ahead. … Consumer Prices …
At the start of next year, the MPC will have to decide what to do with those gilts purchased in its quantitative easing (QE) programme that are about to mature. We expect the Committee to maintain its current loose stance of policy by re-investing the …
Tomorrow’s inflation figures could show CPI inflation falling below its target for the first time since November 2009. And we still see scope for inflation to fall further over the next year or two. While attention is focussed on the upward pressure on …
15th October 2012
The IMF’s new economic forecasts did not tell us more than we already knew. Arguably more important was the IMF’s indication that there is some scope to ease up on the fiscal squeeze. … IMF gives Chancellor some wiggle …
