uk economic outlook solihull business forum – 29 th october 2012 glynn jones west midlands agency

UK Economic Outlook

Solihull Business Forum – 29th October 2012

Glynn Jones

West Midlands Agency

The Current Economic Position


GDP and inflation forecasts

GDP projection based on market interest rate expectations and £375 billion asset purchases



GDP and inflation forecasts

CPI inflation projection based on market interest rate expectations and £375 billion asset purchases

Global Outlook



GDP in selected countries and regions

Sources: Eurostat, Indian Central Statistical Organisation, Instituto Brasileiro de Geografia e Estatística, National Bureau of Statistics of China, Thomson Reuters Datastream and US Bureau of Economic Analysis.

(a) Real GDP measures

(b) Non seasonally adjusted.



Euro-area bond yields

Selected European ten-year government bond yields(a)

Source: Bloomberg.

(a) Yields to maturity on ten-year benchmark government bonds.



Trade performance Ratios of UK exports to UK-weighted rest of G7 imports(a)

Sources: Eurostat, Japan Cabinet Office, ONS, Statistics Canada, Thomson Reuters Datastream, US Bureau of Economic Analysis and Bank calculations.

(a) Chained-volume measures of UK goods (services) exports divided by real imports of goods (services) in Canada, France, Germany, Italy, Japan and the United States, weighted using UK 2011 goods (services) export shares from the 2012 Pink Book. UK goods exports data have been adjusted for MTIC fraud by an amount equal to the ONS’s goods imports adjustment.

Domestic Outlook



Demand & Output

GDP and sectoral output(a)

(a) Chained-volume measures. GDP is at market prices. Indices of sectoral output are at basic prices.

-5

-4

-3

-2

-1

0

1

2

3

4

5

2000 2002 2004 2006 2008 2010 2012

Manufacturing

Services

Score



Demand & Output

Business investment



Demand & Output

Real household consumption and income & Savings Ratio

(a) Includes non-profit institutions serving households.

(b) Total available household resources, deflated by the consumer expenditure deflator.

(c) Chained-volume measure.



Supply & ProductivityOutput & Private Sector Employment



Supply & Productivity Whole-economy and sectoral labour productivity



Supply & Productivity

Regional economies: the West Midlands

Costs & Prices



Costs & Prices

-3

-2

-1

0

1

2

3

4

5

6

7

2000 2002 2004 2006 2008 2010 2012

CPI

RPIX

RPI

Percentage change on a year earlier

Consumer Price Inflation



Costs & Prices

US dollar oil and commodity prices



Costs & Prices

Corporate profit share (excluding financial corporations and the oil sector)



Costs & Prices

Private sector pay settlements(a)

Sources: Bank of England, Incomes Data Services, Industrial Relations Services, the Labour Research Department and ONS.

(a) Three-month mean.

Summary

Monetary Policy

• Exceptionally low interest rates

• Quantitative easing

• FPC recommendation on liquidity buffers

• Extended Collateral Term Repo (ECTR)

• Finance for Lending Scheme

Monetary Policy


Inflation Report - May 2012

www.bankofengland.co.uk/publications/inflationreport/index.htm

Funding for Lending Scheme

Net Lending

Net Lending

0.25% 0.5% - 1.5%

5% of existing loans + new net lending

5% of existing loans AMOUNT

FEE

Whilst reports of production ‘on-shoring’ continue, they are for the most part modest

• Modest rise in repatriation of production

• In services off-shoring continues

• Key drivers:

1. Rising production & transport costs

2. Quality

3. Diversify supply chains

• Impact – low volume, high value-added

• Where firms have moved supply from the Far East, it more often to low labour cost centres in Europe

Many manufacturers express concerns over supply chain and skills capacity

2010 % 16-64 Year Olds with No Qualifications

0.02.04.06.08.0

10.012.014.016.0

uk economic outlook solihull business forum – 29 th october 2012 glynn jones west midlands agency

Documents

usbureau of economic

market prices

basic prices

real imports of goods

statistics canada

thomson reuters datastream

onss goods imports adjustment

rate expectations