A slower recovery than hoped for by the Office for Budget Responsibility – according to the NIESR – 1.7 v. 2.3 for 2011 and 2.2 v. 2.8% for 2012
Mervyn King concerned about lingering inflation – but doesn’t want to raise interest rates for some time
Retail sales grow at fastest rate in 3 years – the CBI distributive monthly trade survey – Howard Archer of Global Insight claims good weather, discounting and the World Cup
Bank of England loses £5.5bn on QE – losses on gilts not corporate bonds. But Ray Barrell of NIESR says QE lifted equity and house prices by around 10pc and adding about 0.5pc growth to GDP in both 2009 and 2010.
Ambrose Evans-Pritchard: Drip after drip of deflation data “In the end, the global macro economy will dictate the outcome. So watch the Chinese banking system. Watch Japanese exports. Watch OPEC as it keeps cutting output to hold up the oil price. Watch Euribor rates and the continued contraction in eurozone lending to companies. Watch French industrial output. Watch Polish sovereign debt (that’s a new one). Watch the M3 money supply in the US as it contracts at a 10pc annualized rate. And for goodness sake watch the Fed Board”. Daily Telegraph.
Allister Heath: Honeymoon is over for the coalition “the consensus view in the City is faulty – or at least subject to much greater risks than most people understand. Everything is predicated on the coalition staying on course and delivering all of the budgetary cleansing it has promised. Yet even though almost none of the cuts have actually happened yet – as opposed to being trailed and debated ad nauseam – the coalition’s popularity is already in free fall. The honeymoon period is coming to a premature end” City AM
Robert Skidelsky and Michael Kennedy: Future Generations will curse us for cutting in a slump “In 1937 Keynes wrote: “The boom, not the slump, is the right time for austerity at the Treasury.” Financial Times.
Guy Monson and Subitha Subramaniam: Austerity drives can unleash confidence “there are limits to Keynesian interventionism. As the state gets larger and larger, the multiplier benefits of government spending become smaller and smaller, and taxing the working many to support the non-working few eventually leads to a system of the working few supporting the non-working many”. Financial Times.
Sean O’Grady: A little heartbreak but few surprises from Mervyn King “Mervyn told us what most of us already knew – that the banks still aren’t lending enough, there isn’t much competition in the area and inflation will stay above 2 per cent for “much of next year”. Mr King said it was “heart breaking” to see the way some businesses were now being treated by their banks, the reverse of good “relationship banking”. Quite right too”. The Independent.