Data to be released today;

Preliminary Q2 GDP – to be released by the ONS here. Expected 0.6%.

Index of Services – for May.

BBA Loans for House Purchase – for June.

Big themes of the day;

The two most important Central Bankers of the world voice stark differences on policy . . .

ECB President Jean-Claude Trichet calls for cuts in public spending and raising taxes to consolidate the recovery. US Federal President Ben Bernanke says it’s too soon for austerity and that we should maintain stimulus in the short term.

Comment and blogs;

David Blanchflower: For once I agree with Osborne “It is clear from listening to Chancellor George Osborne’s testimony to the Treasury select committee on 15 July that he believes monetary policy should remain loose, and I agree with him on that. Rates must remain, as the FOMC put it, at “exceptionally low levels for an extended period”. Plan B would mean further quantitative easing and lots of it. The New Statesman.

Allister Heath: Strong US Profits good for recovery “My biggest worries over the coming months are not what concerns the mainstream (which is obsessed with the impact of fiscal tightening) but rather what will happen to the US money supply (there have been some worrying signs that it may be dropping uncontrollably) and the impact of new rules on the US financial system, including increased capital requirements (which force banks to lend less) and Barack Obama’s new mammoth reform bill (which is already threatening chaos for asset-backed securities and could hit corporate financing). In the meantime, the earnings numbers suggest a traditional cyclical recovery; let’s enjoy it.” City AM.

Hamish McRae: It is no good squealing about dodgy borrowers who cannot get bank credit “Politicians focus on the lack of lending now, both to companies and on mortgages, and make vague, threatening noises about making banks lend more. But that is plain silly. The problem of lack of lending is not really anything to do with British banks; it is the withdrawal of foreign banks.” The Independent.

David Miliband: To grow, Britain must solve its jobs deficit “By committing to the largest fiscal retrenchment in living memory the coalition has gone for broke. The prime minister says it will “change our way of life”. That’s the problem. Ken Clarke used to say that good economics is good politics. The government has turned this on its head. Framing the debate as a choice between the public and private sectors is certainly good politics, but it is bad economics. The Budget will force 600,000 public sector workers into unemployment. With recent surveys suggesting rapidly worsening business confidence and no evidence of an emerging hiring spree, their prospects of finding work in the private sector are bleak.” Financial Times.

Jeremy Warner: Is a double dip recession heading our way? “The good news is that most of the evidence still suggests that a double dip is unlikely. Today’s second quarter GDP figures ought to show continued recovery, albeit at an anaemic rate, and few of the most commonly watched forward indicators yet point to the economy falling back into the abyss.That is not to say that the economic winds are once more set fair; plainly they are not. The odd quarter of negative growth over the next year or two seems more than likely. The one thing we know for sure is that the path to full recovery is going to be slow and uneven.” Daily Telegraph.

Data to be released today;

PMI (Purchasing Managers Index)  Construction Index (of the Chartered Institute of Purchasing & Supply and Markit Economics) – subscription data available from here.

Big thems of the day;

Factory activity at 25-month high – “Manufacturing activity expanded at its fastest pace in more than two years in December, buoyed by a sharp jump in new orders, a survey showed on Monday. The CIPS/Markit purchasing managers’ index rose to 54.1 last month, above the consensus forecast of 52.0 and after a surprise fall to 51.8 in November”.  See Reuters.

Tories have £34bn black hold in spending plans, says Alistair Darling – “The Tories were accused today by the chancellor, Alistair Darling, of having a £34bn black hole in their spending plans as the main parties stepped up their pre-election attacks. A 148-page dossier released by Labour ahead of a press conference by David Cameron, the Conservative leader, said the Tories had only explained how they would pay for £11bn of £45bn in spending pledges”. See the Guardian.

David Cameron launches Tory general election manifesto – “David Cameron will today set out the manifesto he hopes will win the general election while dispatching members of the shadow cabinet to seize the initiative with voters in marginal constituencies. He will place the economy at the top of his party’s agenda, in a speech at Westminster”. See The Telegraph.

Comment and blogs of the day;

Roger Bootle. There are tough times ahead but my money’s on a resurgent UK – “In economic terms, 2009 was one of the most calamitous years in the nation’s history. I suppose it is fitting that forecasters should have shared in this misery, professionally as well as personally. n fact, my own forecasts did not do too badly, all things considered. Even so, the overall tone of my end of term report should be “could have done better”.” See Daily Telegraph.

Allister Heath. Why 2010 will be make or break for UK – “T is hard to believe that just three years ago the UK economy was still being lauded as a great success story; our fall from grace has been spectacular. In 2007, London was overtaking New York as the financial capital of the world, with a resurgent Britannia gracing the covers of US news magazines; today, as the new decade begins, we are being bracketed with the likes of Italy and Greece as nations that might soon default on our national debt”. See City AM.

Hamish McRae. Some reasons to be cheerful in the bumpy months ahead of us – “Anew year brings a new opportunity for economists to humiliate themselves by getting the forecasts utterly wrong. No major forecasting body caught correctly the scale of the slump in the UK last year – all were too optimistic – so why should people take seriously any commentaries, including this one, about the likely path of the economy this year?” See The Indepedent.

Ashley Seager. Britain faces a new age of austerity to repay government debts – “The challenge for whichever party wins this year’s election will be to maintain public services on a much tighter budget. “Great Britain should endeavour to accommodate her future views and designs to the real mediocrity of her circumstances.” So wrote the legendary Scottish economist Adam Smith in An Inquiry into the Nature and Causes of the Wealth of Nations in 1776″. See The Guardian.

Jeremy Warner. Britain yet to face the psychological pain of its new economic status – “Nobody brave enough to have joined the hordes at London’s Brent Cross shopping centre over the past week or two would have believed that we have just been through the deepest economic recession since the 1930s. But it is not just the high street which is skipping along as if once more in the midst of a full scale boom. Restaurants are full, gazumping has returned to the posher end of the London housing market, the stock market has enjoyed a record breaking rally, the art market has revived and fine wines are again achieving top prices at auction”. See Daily Telegraph.

Data to be released today;

Bank of England Quarterly Credit Conditions Survey – at 9.30 am – available from here.

Big themes of the day;

House prices up annual 5.9% – House prices rose for an eighth consecutive month in December to end the year nearly 6 percent higher than they started it, mortgage lender Nationwide said on Thursday. see Reuters.

UK standard of living drops below 2005 level – “The recession has pushed living standards in Britain to below the 2005 general election level, a leading thinktank says as it warns that the country faces a “new age of austerity”.Although many economists think the economy probably returned to growth in the quarter just ending, the deepest recession in decades has punished everyone, according to a report by Oxford Economics”. – see report by Ashley Seager and Biba MCaul in The Guardian here. Original Oxford Economics press release pdf here.

Iceland approves £3.4bn Icesave losse deal – “Iceland’s parliament has agreed to pay back €3.8 billion (£3.4 billion) lost by British and Dutch savers when its banking system collapsed, in a move that is likely to boost the country’s bid to join the European Union”. – see The Times here.

Comment and blogs of the day;

The economic ‘experts’ who stopped making sense. Edmund Conway in the Telegraph marvels at how economists have had a bad year and got away with it – “2009 ought to have been the year that economists well and truly fell from grace. There is surely adequate ammunition to explode any remaining faith in their powers of prediction: the scale of the economic slump, the rise in unemployment, the fact that a small number of extremely rich people have been getting richer while the majority have suffered. But bizarrely enough, it hasn’t happened. Sure, there has been plenty of muttering about economists’ shortcomings; the groans at their failed forecasts (for instance, the fact that house prices, far from falling by 10 per cent this year as predicted, have actually risen by around 3 per cent) are louder”. see here.

The recovery of the housing market: A year of two halves – “This time last year, the headlines were full of doom for the housing market. Prices had already dropped sharply following the collapse of Lehman Brothers in autumn 2008, and all the indications were that they were poised to fall even further — with the gloomier analysts expecting declines, in percentage terms, of at least double figures. Well, what a difference a year makes”. Lucy Denyer in The Times here.

That was the noughties. “We were promised no more boom and bust. We were told Labour would be kind to manufacturing. It would all be so much better than the Thatcher years. We know the claim of no more Boom and Bust proved to be the most absurd. We lurched from super boom to mega bust. What is less well known is just how bad a decade it has been overall, despite the boom”. John Redwood MP’s diary here.

New economics of christmas, a review of the Scroogenomics book by Joel Waldfogel – “Waldfogel is right to question how much just producing precious commodities adds to social welfare. In trying to adjust measures of exchange value to better reflect the worth of things he comes close to much of the work that nef has been pioneering. At the same time, Waldfogel suffers from a bias that is not untypical to people of his profession”. Aleski Knuutila at the New Economics Foundation blog here.