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The continued squeeze on real pay suggests that consumer spending will keep falling for some time. Last week we revised down our forecast for GDP growth this year from 1.5% to 1% and now expect consumer spending to fall by 1.5%, rather than the 1% drop we …
22nd July 2011
The official measure of retail sales rebounded a bit in June, but the underlying trend remains broadly flat. Meanwhile, “Plan A” still seems to be struggling to deliver the planned falls in public sector borrowing. … Retail Sales & Public Finances …
The minutes of July’s MPC meeting suggested that over the past month the Committee has moved even further away from raising interest rates, with most members judging that “recent developments had reduced the likelihood that a tightening in policy would be …
21st July 2011
The Government is unlikely to switch to a Plan B incorporating a markedly slower pace of fiscal consolidation unless the economy is very weak or even in recession. Accordingly, the outlook under Plans A or B is one of weak growth, slow fiscal progress and …
19th July 2011
We now expect GDP growth of only 1% this year (compared to our previous forecast of 1.5%). We still expect growth of only 1.5% in 2012 and think that the economy will struggle to expand by more than 2% or so in 2013. Depending on how the euro-zone debt …
The common perception is that the fiscal squeeze will prompt the traditional North-South divide to widen. However, we think it is more likely that the different regions of the UK will see a more uniform performance in the next few years than in the past. …
15th July 2011
The labour market figures are still painting a bit of a mixed picture about the strength of the jobs recovery. But with the economic recovery still struggling, we continue to expect unemployment to rise further over the next couple of years. And with real …
14th July 2011
June’s better than expected consumer prices figures brought signs that underlying price pressures might be starting to ease and, along with May’s dreadful trade figures, pushed the interest rate debate in the direction of the MPC’s doves. … Consumer …
13th July 2011
The economy has been recovering for almost two years, yet many consumers will be feeling worse off than they did during the recession. With the squeeze on real pay likely to intensify even further, we still expect consumer spending to drop both this year …
12th July 2011
The activity surveys and the official data we have so far suggest that quarterly GDP growth in Q2 was just 0.2% or 0.3%. Part of this weakness just reflects a number of temporary adverse factors affecting growth in Q2, most obviously the extra bank …
June’s producer prices figures showed that cost pressures in the industrial sector are still intensifying, but at a slower pace than before. … Producer Prices …
9th July 2011
With the economic recovery still showing few signs of regaining momentum, the case for raising interest rates is looking weak. Indeed, we think that over the next couple of years renewed quantitative easing is more likely than an increase in interest …
8th July 2011
May’s rise in manufacturing output only just offset April’s bank holiday-related drop, adding to other evidence suggesting that the industrial recovery is weakening. … Industrial Production …
The bounce in house prices in June is unlikely to signal that the downwards pressure on house prices has abated. With the squeeze on real pay likely to intensify until well into next year, house prices still have further to fall. … Halifax House Prices …
7th July 2011
A raft of negative news from the high street suggests that falling real incomes are taking their toll on the consumer sector. … Consumers bowing under the …
6th July 2011
June’s UK CIPS/Markit report on services suggested that the recovery in the biggest part of the economy has regained a little momentum. But growth in the sector, and indeed the economy as a whole, remains very sluggish. … CIPS/Markit Report on Services …
Inflation fell sharply in most countries in the region last month, due in large part to a surprise drop in food prices. This appears to have been driven by one-off factors relating to the outbreak of e.coli in Germany. As such, we may see a bounce in food …
5th July 2011
Last week brought news of a string of collapses among well-known retailers. Meanwhile, even the relative winners on the high street are having to work harder to gain sales, with discounting reportedly particularly intense in the past couple of weeks. … …
June’s CIPS/Markit report on manufacturing appeared to confirm that the previously robust recovery in the industrial sector is rapidly losing steam. … CIPS/Markit Report on Manuf. …
2nd July 2011
There was little in the Bank of England’s latest Credit Conditions Survey to suggest that bank lending is set to pick up any time soon. … Credit Conditions (Q2), Cons. Conf. (Jun.) & Pay settlements …
1st July 2011
The Nationwide house price index was unchanged in June. But the regional indices show that the resilience of the national index over the past year or so is largely down to London where, in contrast to the rest of the country, house prices continue to …
There are still no signs of any pick-up in broad money or lending growth, suggesting that the medium-term outlook for both economic growth and inflation remains pretty weak. … Monetary Indicators Monitor …
30th June 2011
The latest mortgage lending figures confirm that housing market activity remains very weak. That’s unlikely to change while the squeeze on real pay continues. … Mortgage Lending …
There were no major changes to the overall growth picture in Q1’s National Accounts. But the economy does not appear to have been making as much progress towards rebalancing as previously appeared to be the case. … National Accounts & Balance of Payments …
29th June 2011
Last week’s public finances figures for May brought the clearest signs yet that the weakness of the economy is starting to hinder the Government’s fiscal consolidation efforts. … Sagging tax receipts put cracks in Plan …
28th June 2011
The minutes of June’s MPC meeting suggested that the Committee is moving even further away from a near-term interest rate rise – with more members starting to contemplate giving the economy extra support. … MPC Minutes …
23rd June 2011
May’s public finances figures brought the clearest signs yet that the weakness of the economy is having an adverse effect on the public finances. … Public Finances (May) & CBI Ind. Trends …
22nd June 2011
The Greek debt crisis escalated last week, but the UK has remained immune from the contagion fears that have spread to other debt-ridden countries in Europe. … UK escapes Greek contagion …
21st June 2011
Consumer spending has fallen for two quarters in a row, meaning that the household sector is now technically back in recession. Although high street spending picked up in April, that appears to have been only a temporary improvement in response to the …
17th June 2011
June’s UK CIPS/Markit report on services suggested that the recovery in the biggest part of the economy has regained a little momentum. But growth in the sector, and indeed the economy as a whole, remains very sluggish. … Retail Sales …
The labour market figures are still giving a bit of a mixed picture about how well the jobs recovery is faring. But the squeeze on real pay is very clear – reinforcing our concerns about the outlook for consumer spending. … Labour Market Data …
16th June 2011
May’s unchanged CPI inflation rate represents just a temporary pause in an upward trend which could take inflation to 5.5% or above. But medium-term influences still point to sharp falls in inflation next year and beyond. … Consumer Prices …
15th June 2011
Deliberately embracing higher inflation as a way out of the sovereign debt crisis could have disastrous consequences. Instead, for most advanced countries, wherever it is feasible, a combination of fiscal austerity and sustained economic growth offers the …
14th June 2011
The Chancellor is stuck between the proverbial rock and hard place. Yes, the fiscal squeeze is stifling the recovery. But abandoning the consolidation would not guarantee that growth prospects would be any better. … Between a rock and a hard …
April’s industrial production figures were heavily distorted by one-off factors and were therefore not nearly as bad as they look. Still, with the trend in activity slowing and cost pressures still very strong, the outlook for industry is far from rosy. … …
11th June 2011
9th June 2011
April’s UK trade figures suggested that the big boost to GDP growth in the first quarter from the external sector is unlikely to be repeated this quarter. … Trade …
The ongoing concerns over the lack of a “Plan B”, should the economy be weaker than the Government’s fiscal plans assume, underline the need for interest rates to stay low for a long time yet. … Plan B worries underline low interest rate …
7th June 2011
The latest small rise in the Halifax house price index does little to change the bigger picture that prices on this measure are trending lower. Given the struggling economic recovery and the fact that the fiscal contraction will only get more severe from …
There is little chance of an interest rate rise this month. Last month’s Inflation Report did not suggest that an imminent rate hike was required. And the economic data have retained a fairly soft tone. There is still a danger of a rise later this year. …
6th June 2011
On the face of it, the sharp drop in last week’s manufacturing PMI suggested that output in the sector has actually started to fall again. It is clearly disappointing that even the previously bright spot of the recovery is now starting to crumble. … Even …
May’s CIPS/Markit report on services was thankfully not as bad as the manufacturing survey released earlier this week. Nonetheless, the slight deterioration provided further evidence that the economic recovery is still struggling. … CIPS/Markit Report on …
3rd June 2011
The relative performance of the regions of the UK over the next few years depends in part on their different exposure to the public sector and the fiscal squeeze. The fringes of the UK – and Northern Ireland in particular – stand to be worst affected, but …
2nd June 2011
The long-awaited re-balancing of the economy seems to be underway, with net trade making a huge positive contribution to quarterly GDP growth in Q1. However, the 1.3% contraction in domestic demand was not pretty, driven by falls in both consumer spending …
The latest monetary indicators show that broad money growth remains exceptionally weak, suggesting that the recent slowdown in the pace of economic recovery may be more than just a temporary soft patch. … Monetary Indicators Monitor …
1st June 2011
Today’s manufacturing and household borrowing data provided further evidence that the UK’s economic recovery is now struggling across the board. … CIPS/Markit Report on Manuf. (May) & H'hold Borrowing …
A re-balancing of the economy has been needed for some time – but this wasn’t quite what we had in mind! The danger now is that domestic demand continues to weaken, while net trade is unable to keep up this degree of support. … Re-balancing in the …
30th May 2011
December’s producer prices figures revealed that cost pressures in the manufacturing sector are continuing to intensify. But this should not prevent consumer price inflation from falling back in the medium term. … Nationwide House Prices …
27th May 2011
The lack of any upward revision to UK GDP in Q1 leaves the economic recovery still looking disappointingly weak. Of course, we are now over halfway through the second quarter. But while high street spending has done well over the last couple of months, …
25th May 2011
April’s public finance figures have got the new fiscal year off to a bad start. We continue to doubt that the Government will be able to get borrowing down to meet the fiscal projections this year or next. … Public Finances …
24th May 2011
