UK recession may not be as deep as feared, if indeed we are in recession at all. Martin Weale a member of the MPC suggested this week, Britain is not in recession, it is just not growing. It is more like a sustained period of stagnation. The squeeze on household incomes through rising fuel and petrol prices continues but may be coming to an end soon. Download The Saturday Economist 18th August.
Yes economic news this week, inflation CPI basis increased by 2.6% in July compared to 2.4% in June. RPI and RPIX inflation increased to 3.2%. Earnings were up by just 1.6% suggesting the squeeze on real incomes persists as prices are still rising.
Oil price Brent Crude closed at $113 per barrel up from a low of ?90 in June, this is the air conditioning season after all, prospects for oil and commodity prices suggest little respite to energy costs and the income squeeze this year.
In other news, unemployment fell as the claimant rate fell by just under 6,000 in July to 1.59 million. The wider LFS survey confirmed a fall of 46,000 in the three months to June to a level of 2.564 million and a rate of 8%.
Retail sales volumes increased by 2.8% in July and retail sales values increased by 3.1%. The June volumes were also revised up to 2.6%, so over the last three months retail sales have averaged 2.5%. Still below the long run average of 3.4% but this is not recession territory.
News from the SMMT, the Society of Motor Manufacturers and Traders confirmed car manufacturing output surged by 22% in July and 15% year to date. Car output is likely to hit 1.45 million units this year, still some 10% below the output achieved in 2008 and well below the two million forecast unit sales this year but good news nevertheless.
So what to make of it all? Rising inflation, falling unemployment, retail sales up and car manufacturing up, this is not consistent with an economy in recession or flat lining for that matter.
Our model based on output and employment, suggests the economy grew by around 1% in the second quarter and will grow by around 1.2% for the year as a whole. Check out The Saturday Economist for a detailed review of the economics news this week. Our resident head of research Professor Milton Keynes begins to unravel the productivity paradox.
In the minutes of the MPC meeting for the month, the nine members voted unanimously to maintain base rates at 0.5% and to maintain the level of QE at ?375 billion. ?For some members the decision was nevertheless more finely balanced, since a good case could be
made at this meeting for more asset purchases.?
The markets have assumed that more QE will follow but a further fall in base rates to 0.25% appears to be unlikely. Ten year gilt yields increased to 1.67% by the end of the week rallying by just over ten basis points, which suggests the likelihood of more QE is falling despite the ambivalent statement from the Monetary Committee.
The MPC is placing great faith in the Finance for Lending Scheme. The FLS has the potential to improve funding conditions for banks materially and to encourage lending, thus providing some support to both demand and supply, the minutes revealed. (Based on the assumption that households and businesses are prepared to borrow of course). Let us hope, the MPC have found a new toy to replace QE. It looks relatively harmless.
In other news, investors welcomed the statement by Angela Merkel as the Chancellor explained the pledge by the European Central Bank to do whatever it takes to support the euro project was ?completely in line? with the views of the Euro leaders. Markets rallied and the Euro responded. It was another kick of the can down the long road for the embattled currency.
So an interesting week for economy watchers. On the whole, we think this is good news. Don?t miss the Sunday Times and Croissants, out tomorrow. Have a great week-end.
Join me ? LinkedIn, Twitter, Facebook, Google+, Pinterest, Vimeo, Prezi, Edocr, Slideshare.
howard johnson blackhawks real housewives of new jersey levon helm firelight world peace elbow kevin love
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.