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May’s official retail sales figures suggested that high street spending has not weakened as much as the recent retail surveys have suggested. Nonetheless, it is hard to see spending on any measure holding up once the fiscal squeeze starts. … UK Retail …
17th June 2010
The UK labour market is showing tentative signs of improvement, but still looks too fragile to withstand the looming public sector job cuts. … UK Labour Data …
16th June 2010
The new Governments emergency Budget on June 22 will mark the beginning of the biggest fiscal squeeze seen since the end of the Second World War. This will act as a significant drag on the economy over the next few years and necessitate the need for …
15th June 2010
May’s UK consumer prices figures provided some reassurance that the MPC will be able to avoid the nightmare scenario of having to raise interest rates just as an enormous fiscal squeeze hits the economy. … UK Consumer Prices …
The lower path of public borrowing projected by the Office for Budget Responsibility might seem to relieve some of the pressure for an additional fiscal tightening in next week’s Budget. But we don’t yet know quite what the new Government’s fiscal …
14th June 2010
This week’s pronouncements by the newly created Office for Budget Responsibility (OBR) could set a gloomy backdrop for the emergency Budget due in just over a week’s time. For a start, the OBR is likely to revise down the GDP growth forecasts used in the …
Today’s UK data contained mixed news on the inflation outlook, with easing cost pressures contrasting with rising inflation expectations. We still place little weight on inflation expectations as an indicator of future inflation and continue to think that …
11th June 2010
10th June 2010
April’s trade figures suggested that the external sector is still in no position to offset the effects of the fiscal squeeze that is now almost upon us. … UK Trade …
9th June 2010
The Canadian experience of the mid-1990s has been taken by many as evidence that the UK’s large government deficit can be brought under control fairly easily and without undermining the broader economy. However, a closer look is less reassuring. … UK …
8th June 2010
With public sector job cuts looming, the outlook for employment hinges on whether or not hiring in the sector picks up pace. While some recent indicators of employment intentions have been encouraging, we still find it hard to envisage anything but a …
7th June 2010
Cracks already seem to be appearing in the recovery on the services side of the economy. Admittedly, overall GDP growth in the second quarter could still prove to be fairly reasonable, in part due to the more robust recovery in the industrial sector. But …
The further rise in CPI inflation in April – which triggered another letter from the Governor to the Chancellor – prompted claims that the MPC is being too sanguine about the inflation outlook. But we still think that the MPC is right to expect inflation …
4th June 2010
The contradictory messages offered by the Halifax and Nationwide house price data make it almost impossible to draw clear conclusions about the health of the market. But, at the very least, May’s drop in the Halifax index highlights the fragility of the …
The contradictory messages offered by the Halifax and Nationwide house pric data make it almost impossible to draw clear conclusions about the health of the market. But, at the very least, May’s drop in the Halifax index highlights the fragility of the …
The Monetary Policy Committee (MPC) appears, more than ever, to be in wait and see mode. A number of uncertainties – such as the severity of the upcoming fiscal squeeze and the impact of recent events in the euro-zone on the UK – argue for keeping policy …
3rd June 2010
May’s UK CIPS/Markit report on services provided further evidence that the recovery in the biggest part of the economy is struggling to pick up pace. … UK CIPS/Markit Report on Services …
It is still early days, but our prediction last month that April would be the high water mark for house price inflation appears to have been borne out. For now, house prices continue to rise, but easing supply shortages, overvaluation and, of course, the …
The broad money supply has finally started to grow at the rates the MPC was aiming for when it began its policy of quantitative easing (QE). However, we are yet to see a decent pick-up in bank lending. … Monetary Indicators Monitor …
2nd June 2010
The latest rise in mortgage approvals for house purchase cannot disguise the bigger picture of a lending market that is depressed. The subdued picture for net lending might also mean that anyone hoping for a further easing in mortgage credit conditions …
Companies balance sheets are in a broadly healthy state, suggesting that firms can avoid the prolonged period of deleveraging facing other parts of the economy. But there are plenty of other reasons why companies are unlikely to lead the economy into a …
1st June 2010
May’s CIPS/Markit report on manufacturing provided further evidence that the industrial recovery is still going strong. However, industry makes up less than a fifth of the economy and the recovery elsewhere looks less robust. … CIPS/Markit Report on …
Our initial response to the OECD’s recommendation that UK interest rates should rise to 3.5% by the end of next year (“completely mad”) may have been a bit extreme. Nonetheless, it seems to neglect three key factors which suggest such a rise would be both …
31st May 2010
The second estimate of Q1 GDP brought little sign of the re-balancing of the economy which will be vital if a solid recovery is to be maintained once the impending fiscal squeeze kicks in. … GDP: Output, Income and Expenditure …
25th May 2010
The planned efficiency savings detailed by the new Government today are just the tip of the iceberg. Much bigger cuts, alongside hefty tax increases, will be needed to bring the budget deficit down. … Spending cuts just the tip of the …
24th May 2010
Last week’s letter from Mervyn King to the new Chancellor George Osborne after inflation surprised on the upside again drew accusations that the Governor is being dangerously sanguine on the inflation outlook. And there were hints in the May MPC minutes …
Consumer spending has struggled to pick up again even though the various temporary factors weighing on spending earlier in the year have now disappeared. The consumer recovery may yet gain some momentum in the next few months. However, we remain concerned …
20th May 2010
April’s UK retail sales figures confirmed that high street spending continues to expand at a modest pace. With consumers set to shoulder a large part of the coming fiscal squeeze, the outlook for spending remains fragile. … UK Retail Sales …
If we are wrong in expecting UK consumer price inflation to fall back over the next year or so, the consequences for the economy - higher interest rates alongside a huge fiscal squeeze - could be disastrous. But we still think there are good reasons to …
19th May 2010
The minutes of May’s MPC confirmed that the Committee as a whole is still singing from the same Dovish hymn sheet as the Governor. Interest rates are unlikely to rise for a long time and further unconventional support is yet possible. … MPC Minutes …
CPI inflation surprised on the upside again in April. But Mervyn King made it clear in his letter to the new Chancellor George Osborne that the MPC is not about to panic and raise interest rates in response. … UK Consumer Prices …
18th May 2010
George Osborne’s presentation today of the new Office for Budget Responsibility as an answer to the previous Government’s habitual over-optimism on the economy and the public finances reinforces our expectation that the emergency Budget on 22nd June will …
17th May 2010
Co-ordination between fiscal and monetary policy already appears to have stepped up a gear since the new Government took office, with Bank of England Governor Mervyn King endorsing the Government’s planned cuts in spending this year. Whether or not …
The fact that the forthcoming emergency budget will incorporate economic and fiscal forecasts produced by the new Office for Budget Responsibility (OBR) increases the likelihood that it will include sizeable tax increases. … OBR could prompt bigger budget …
13th May 2010
March’s trade figures suggested that, after a period of weather-induced volatility, the underlying trend in net trade remains disappointingly weak. It remains hard to see what part of the economy is in a fit enough state to compensate for the looming …
The dovish tone of the Bank of England’s May Inflation Report suggested that the Monetary Policy Committee (MPC) has no intention of tightening policy anytime soon. If anything, it is more likely to loosen policy further. … Inflation Report (May) & Labour …
12th May 2010
While the first job for the coalition parties was to iron out the differences in their manifesto pledges, the tax changes announced are just a sideshow to the real action needed to address the fiscal crisis. … Tax bargaining just a sideshow to the great …
