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  • Economics Roundup – Tuesday 10th August

    August 10th, 2010

    Data released over the last few days;

    New car sales – fell in July, registrations from business customers fell 6.5 percent, private customer registrations were down 28.5 percent on the year – blamed on end of scrappage scheme.

    June industrial output – unexpectedly fell 0.5% rather than a forecast rise of 0.2%. This was blamed on earlier than usual, i.e. in June rather than August maintenance on oil and gas fields, thus preventing full extraction.

    Company failures in sharp decline, personal insolvencies may have peaked – according to the Insolvency Service.

    RICS UK Housing Market Survey – shows first fall in a year. 8% more surveyors reported a fall than a rise and the number of new vendor instructions which in effect measures the amount of properties coming to the market, increased. 33 per cent more surveyors reported a rise rather than fall in properties to their books, up from 28 per cent in June.

    Selected comment;

    Philip Inman: Mystery of Britain’s missing exports “At the Bank of England they are scratching their heads. Across town at the Victoria Street offices of Vince Cable’s Department for Business, Innovation and Skills there are the same perplexed looks. Everyone is asking why UK businesses are unable to export their way out of recession“. The Guardian.

    Jeremy Warner: Mervyn King should stop complaining about bank lending and try more QE “What is obviously true, however, is that demand for working capital will increase sharply once the economic recovery takes hold, and that as things stand, the banks won’t be able to finance it. The still impaired state of the banking system could therefore put a powerful brake on growth. The Bank of England is actually not as impotent in all this as it likes to pretend. In fact it could quite easily assist in the provision of small business lending. Unlike the Federal Reserve in the United States, the Bank has concentrated virtually all its £200bn of “quantitative easing” on UK government bonds, or gilts” Daily Telegraph.

    Sean O’Grady: ‘Slowflation’ – the combination the Bank of England fears most “The “double dip” recession seems to be getting closer, and growth will be slow. But shop prices will climb higher, thanks to commodity price inflation and the 25 per cent deprecation in the pound between 2007 and 2009. In 2008, the last time we saw this sort of commodity price boom, the CPI peaked at 5.2 per cent, and no one would be amazed if it hit that level again next year. We might call it “slowflation”.” The Independent

    Bidaily Economics Roundup – Wednesday 4th August

    August 4th, 2010

    Data released over the last few days;

    2nd August: PMI Construction – slowed to a four month low in July – to 54.1 from 58.4

    3rd August: CIPS Manufacturing Index for July – looks strong at 57.3 beating forecast of 57.0 – the Guardian however picks up on the detail inside those figures which showed an export slowdown

    3rd August: British Retail Consortium July Shop Price Index – annualised at 2.5% in July compared to 1.7% in June – “due to higher animal feed and wheat costs, pills and strong rises in the price of other commodities such as palm oil, ed cocoa and soya oil”.

    4th August: Halifax House Price Index for July – up 0.6% compared to an expected fall of 0.3%.

    4th August: Service sector growth slows to 13 month low – according to the CIPS – the index of activity fell from 54.4 in June to 53.1 in July

    Bidaily Economics Roundup – Friday 30th July

    July 30th, 2010

    Big themes;

    U.S. recovery growth is slowing – Q2 at an annualised 2.4%, below the forecasted rate and much less than the 3.7% for Q1 – debate is very much now whether another stimulus is needed

    UK consumer confidence falls to lowest in four years – as measured by the UK’s index of consumer sentiment – take a look at the 5 year chart here to see how far off we are from pre-recession times.

    House prices fell 0.5% in July according to Nationwide – the first since February and larger than forecast 0.2%

    M4 lending at lowest level since records began in 1964 – some believe this may be counterbalanced by firms increased investment spending over decreased borrowing

    Selected comment;

    Hamish McRae: The subtle hand we must play on trade “we have to recognise both that it is not just the BRICs that matter and that selling services to a host of different countries is going to be a tricky, subtle task. But that is what makes life interesting for the UK. We have a really interesting hand of cards to play and it is good to see that our new government is trying to play it with sensitivity. See David Cameron’s comments in Turkey in that light”. The Independent.

    Jeremy Warner: Whatever happened to the rebalancing act? “After years in which many Western countries had become dependent for growth and prosperity on debt-fuelled consumption and property inflation, there would be a miraculous rebalancing of the world economy into a more sustainable order of things. What is the evidence for this happy transformation in economic dynamics actually taking place? Virtually none, I’m afraid to say”. Daily Telegraph.

    Sir Samuel Brittan: Take central banks down a notch “no major central bank had any inkling of the weakness developing in the world financial system. There was the obstinate refusal to take asset bubbles seriously and the wrongheaded preoccupation with short-term targets for narrowly defined inflation indices. In the background was a shift from an excessive preoccupation by central banks with financial institutions to the other extreme of their becoming virtual econometrics factories.Yet despite everything I would still support central bank independence, if for no other reason than that no body has a monopoly of wisdom”. Financial Times.

    Bidaily economics roundup – Wednesday 28th July

    July 29th, 2010

    Big themes;

    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.

    Selected comment;

    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.

    Bidaily Economics Roundup – Monday 26th July

    July 28th, 2010

    Big themes of the last 3 days;

    1. The stunning 1.1% quarterly GDP growth figure for Q1 – twice that anticipated by most UK economists – see Reuters
    2. Ernst & Young Item Club forecast interest rates to stay at 0.5% until 2014. The Item Club.
    3. House prices fall for the first time in 15 months – according to Hometrack, 0.1% in July, the first fall since April 2009. See here.

    Selected comment;

    David Smith: Growth leaps but it’s a creditless recovery “. . .even amid the warm glow of an economy recovering faster than expected . . . strong growth alongside very weak lending adds up to a creditless recovery. The question is how long this creditless growth can continue.” Sunday Times.

    William Keegan: The legacy of Lady Thatcher haunts Osborne still “The chancellor is right to want to break with the last two governments and actively rebalance the economy. But his obsession with deficit-cutting is old-school Thatcherism at its worst”. Keegan also queries the wisdom of the Chancellor banking on a continued loose monetary policy to offset a tight fiscal one . . . “At the moment the hawks on the monetary policy committee are in a minority. It would be unfortunate if we had a savage fiscal policy based on the assumption that monetary policy remained “supportive” and then the Bank acted in a way that made nonsense of that assumption – would it not?” The Observer (guardian website).

    Roger Bootle fears an extended period of low growth and rising unemployment more than a double dip: Right, I’ll see your double dip and raise you an economic black hole “So far, the recovery has been better than almost anybody expected. But only when the cuts (and tax rises) start to bite will we see the real challenge. Accordingly, for the UK I think that the second scenario of several years of disappointingly weak growth should be regarded as the central case. Mind you, it lacks a catchy name to compete with “double dip”. Did I hear someone suggest “economic black hole”?” Daily Telegraph.