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March’s industrial production figures confirmed that the industrial sector expanded strongly in the first quarter of the year. But industry is not big enough to drive a solid recovery in the overall economy. … UK Industrial Production …
11th May 2010
Political uncertainty no doubt played a large part in the decision by the Monetary Policy Committee (MPC) to keep policy unchanged today. But with a large fiscal squeeze looming - whatever government is formed - monetary policy will have to stay extremely …
10th May 2010
Whether or not the Conservatives and the Liberal Democrats are able to form a stable government will depend on all sorts of issues. But we see no reason why apparent differences on economic and fiscal policy should be a major stumbling block. … Economy …
The fact that a hung parliament was widely expected helped to dampen the impact on markets. But the key question now is whether the election result will prompt markets to start to put the UK in the same bracket as Greece and the euro-zone’s other …
News that the Halifax house price index suffered a marginal fall in April is a reminder that the recovery in house prices has not had a firm economic foundation. With the acute supply shortages that characterised the market last year now easing, and the …
7th May 2010
April’s UK CIPS/Markit report on services suggested that the recovery in the services sector is failing to maintain the momentum seen on the industrial side of the economy. … UK CIPS/Markit Report on Services …
6th May 2010
By any ordinary standards, the economic backdrop to the general election is poor. Only on three previous occasions since 1955 have elections taken place against a background of negative annual GDP growth. (See Chart.) Admittedly, the economic environment …
We are not convinced that a hung parliament in the UK would now be such bad news for all sterling assets. Whatever the outcome of tomorrow’s general election, we think 10-year gilt yields will drop to around 3% by the end of the year. We also expect the …
5th May 2010
Tomorrow’s general election will mark the beginning of a new and difficult phase for the UK economy. Get ready for the Great Squeeze. … UK election ushers in the Great …
May’s Monetary Policy Committee (MPC) meeting comes just before the publication of the next Inflation Report, making a change of policy slightly more likely than in the past couple of months. However, we think that the Committee is likely to stand pat …
There are finally tentative signs that the Bank of England’s programme of quantitative easing (QE) is boosting the broad money supply. However, bank lending, particularly to businesses, remains weak. … Monetary Indicators Monitor …
4th May 2010
April’s CIPS/Markit report on manufacturing provided further evidence that the economic recovery, for now, is building a decent amount of momentum. However, the continued weakness of housing market activity highlighted just one of the ways in which the …
The Government is going into the election against a fairly favourable backdrop of an expanding economy, a falling claimant count and rising house prices. So it may be disappointed that this economic improvement has not translated into a bigger pick-up in …
3rd May 2010
While all main parties look set to leave the current inflation-targeting regime in place, all seem agreed on the need for some form of so-called “macroprudential” toolkit. New tools to control asset prices and credit growth could allow policymakers to …
29th April 2010
The rapid escalation of the Greek fiscal crisis has prompted inevitable questions over whether the UK faces similar dangers. So far, UK markets are probably right to have been sanguine. But that might change if a clearer plan to address the UK’s fiscal …
This report is only available as a PDF. Click to download. … Nationwide House Prices (Apr.) …
House price inflation returned to double-digit rates in April, for the first time since June 2007. However, with the pressure on household incomes more likely to rise than ease and surveys pointing to a new mood of caution amongst buyers, house price …
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 …
Analysis of the likely behaviour and influence of the exchange rate after the election has tended to focus on the possibility of a further sharp depreciation in the event of a hung parliament. But there are reasons why the opposite scenario – a …
28th April 2010
The argument over whether Labour’s National Insurance rise or the Conservatives’ efficiency savings will cost more jobs detracts from the bigger picture that the required fiscal squeeze will result in the loss of up to 750,000 public sector jobs over the …
With consumers so far fighting off any preelection nerves, the consumer recovery could gather further momentum in the next month or two. But the second half of the year should look rather different to the first as the recent sweet spot for consumers …
26th April 2010
Last week’s public finances figures for March, revealing a £3bn undershoot of the Chancellor’s forecast for public borrowing in 2009-10, may have raised hopes that the beneficial effects on the public finances of a stronger economy may relieve the need …
This report is only available as a PDF. Click to download. … Preliminary GDP (Q1) …
23rd April 2010
The weakness of GDP growth in the first quarter of this year may not be as bad for the Government’s election prospects as it might seem. But it is clearly disappointing for the economic outlook. … Preliminary GDP …
There are some signs that markets are becoming rather less fearful of the prospect of a hung parliament after the election on May 6th. … Are hung parliament fears …
22nd April 2010
Consumer spending has continued to bounce back from the snow and VAT related weakness seen at the start of the year. And with consumer confidence holding up despite the looming fiscal squeeze, the consumer recovery could continue to gather pace for a …
March’s public finances figures provided the Government with a modest pre-election boost in revealing an unexpected undershoot of the Budget forecasts for public borrowing in 2009/10. But a long and painful fiscal squeeze still lies ahead. … Public …
The outcome of the general election on May 6 is unlikely to transform the basic trajectory of the UK economy over the next five years. Whoever gains power will find their economic policy priorities dominated, and their ambitions hindered, by the …
21st April 2010
The minutes of April’s Monetary Policy Committee (MPC) meeting showed that the Committee is still unlikely to alter policy in the near future. Meanwhile, despite the headline-grabbing drop in claimant count unemployment in March, employment is still …
March’s CPI figures will have done little to reassure those MPC members who have recently sounded a bit more concerned about the inflation outlook. But they should not cause the Committee to think seriously about tightening policy. … UK Consumer Prices …
20th April 2010
Estimates of the financial cost to the UK airline industry of the eruption of the Eyjafjallajökull volcano in Iceland are mounting. But we doubt that the economic cost of the eruption will have a material impact on the UK’s economic recovery. … Hot ash …
19th April 2010
Last week’s trade figures could signal that the external sector is finally set to provide the economy with a decent amount of support. But we would be cautious about reading too much into the narrowing of the trade deficit. The weather has made the …
February’s trade figures finally brought some good news about the exporting side of the economy. But there is a long way to go before the external sector can fully compensate for the weakness in the domestic economy. … UK Trade (Feb.) & BRC Retail Sales …
13th April 2010
Having been largely overlooked as a sector in inexorable decline for the last decade or more, attention has recently re-focused on industry as a potential source of growth to offset the likely weakness of the financial sector and other parts of the …
12th April 2010
March’s surprisingly strong rise in UK producer prices will prompt some concern that pipeline inflation pressures are building. But there are good reasons not to be too concerned. … Producer Prices …
9th April 2010
Estimates of the financial cost to the UK airline industry of the eruption of the Eyjafjallajökull volcano in Iceland are mounting. But we doubt that the economic cost of the eruption will have a material impact on the UK’s economic recovery. … MPC waits …
8th April 2010
The rise in the Halifax house price index in March suggests that February’s drop was not the start of a new downward trend. However, with market conditions now loosening, mortgage lending criteria still tight and the economy set to remain weak, house …
Surveys of house price expectations, although weakening, are yet to signal the renewed falls that we are forecasting for the second half of this year. However, their record in anticipating price movements is mixed, with consumers’ expectations in …
Hopes for a strong recovery in the UK economy rest on a decent boost to the external sector from the drop in the pound. But it is looking less and less likely that the exporting sector will manage to offset the continued weakness in the domestic economy. …
7th April 2010
The news on the UK economy in the approach to the general election now looks likely to be reasonably upbeat. But the key question is whether voters will translate that better news into greater optimism about their own prospects. With a major fiscal …
The latest batch of data on the services sector painted a mixed picture of the strength of the recovery in the biggest part of the economy. But at least the economy appears to have avoided relapsing into recession in the first quarter. … UK CIPS/Markit …
With just over a month to the expected date of the general election, the recent economic data - while not spectacular - have probably come as a bit of a relief for the Government. Last week’s further upward revision to Q4 GDP means that, although the UK …
5th April 2010
The latest manufacturing data suggested that the industrial recovery is progressing nicely. But the Bank of England’s credit conditions survey did little to alter our view that a prolonged period of sluggish lending growth lies ahead. … CIPS/Markit …
1st April 2010
