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The saturday economist 16th june 2012

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The Saturday Economist 16th June, News and Updates on the UK Economy.

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The saturday economist 16th june 2012

  1. 1. The Saturday Economist johnashcroft.co.uk Log In | Register | My Account | iPad App | In this issue : Page No. Saturday June 16th 2012 The week in review 2 World Bank and Global Economic Prospects 3 New “Funding for Lending” liquidity provisions 4 Manufacturing Output - April 5 UK Trade Figures - April 6 Oil Price Watch 7 John Ashcroft is Chief Executive Latest Economic Indicators 8 of pro.manchester, a director of Marketing Manchester, a member of the Greater Manchester Chamber of Commerce, the AGMA Business Leadership Council and a visiting professor at Don’t miss MMU Business School the weekly specialising in Macro Economics and Corporate Strategy. e-mail London School of Economics London Business School with a Check out www.johnashcroft.co.uk, Join me on LinkedIn, Twitter or Google+ PhD in macro economics from MMU.Saturday, 16 June 12
  2. 2. The Saturday Economist johnashcroft.co.uk Log In | Register | My Account | iPad App | Saturday June 16th 2012 The Week in Review - manufacturing output is flat, the trade figures disappoint again but the World Bank suggests there is hope for the world. Despite the problems in Euroland, the slow down in India, China and world trade, the World Bank released a relatively upbeat assessment for the 2012 Global Economic Prospects. World trade is expected to grow by 5.3% and world GDP will grow by a respectable 2.5% despite negative growth in the Euro area. The Governor of the Bank of England was not quite so positive at the Mansion House Dinner on Thursday night. A night of long shadows and dark clouds would sum up the oration, with dark clouds featuring six times in the twenty minute speech. Eventually, he said, the storms from overseas will have passed over our shores and the economic skies will begin to brighten. World trade to grow by over 5% in 2012 Slightly alarming - the new round of liquidity provision for banking with a “Funding for Lending” programme. The Bank is planning to swap collateralised mortgage debt or SME loans as security for T bills. The Extended Collateral Term Repo Facility will also be brought into play and quickly. The Chancellor made a good speech, sitting next to his speech writer and private secretary I can say little else. The £100 billion plan to support bank lending into SMEs and Households may be better intentioned than effected in the end. Is this policy planning or panic reaction. It’s planning for panic. In other news this week, the trade figures and manufacturing output figures will disappoint policy makers but come as no surprise to readers of the Saturday Economist. Manufacturing output is flat and the trade figures just get worse. So what’s new. The problems in Europe just a small part of the problem. JKA Britain “safe in the storm” Check out www.johnashcroft.co.uk, Join me on LinkedIn, Twitter or Google+ Page 2Saturday, 16 June 12
  3. 3. The Saturday Economist johnashcroft.co.uk Log In | Register | My Account | iPad App | Saturday June 16th 2012 World Bank and Global Economic Prospects Despite the problems in Europe, and the slowdown in India, China and world trade, the World Bank produced a relatively upbeat assessment of the world economy and prospects for growth. World GDP is expected to grow by a respectable 2.5% compared to 2.7% last year and 3% in 2013. Growth in the developing economies will grow by 3.6%, USA by 2.1% and Japan is expected to grow by 2.4%. In Euroland negative growth of 0.3% is expected. World trade will grow by 5.3% according to the Bank compared to just over 6% last year and 13% in 2010. World trade to grow by 5.3% Inflation will remain muted, sub 2% as commodity prices fall back after the heady rise of 2010 and 2011. In the two years commodity prices have risen by over 40% but are expected to fall by around 9% this year. Oil prices will hold around the $100 dollar per barrel level over the next three years, providing a little respite to the rate of change of energy prices. All in all a plausible scenario, the world is not coming to an end just yet! World GDP by 2.5% Check out www.johnashcroft.co.uk, Join me on LinkedIn, Twitter or Google+ Page 3Saturday, 16 June 12
  4. 4. The Saturday Economist johnashcroft.co.uk Log In | Register | My Account | iPad App | Saturday June 16th 2012 New Liquidity Provisions - long shadows and dark clouds At the Mansion House Dinner on Thursday evening the Chancellor announced a new round of “Funding for Lending” in an attempt to kick start a wider programme of bank liquidity and lending to business, property and households. Mervyn King spoke of the ugly picture developing in Europe with long shadows and black clouds hanging over the UK economy. Mentioning dark clouds not once but six times, the Governor is outclassing Nouriel Roubini (Dr Doom) “dark clouds are gathering around the world”. Liquidity, funding and capital are the major challenges for the banking system but the governor made clear the bank is ready to stand as the lender of last resort providing emergency liquidity provision to a banking system potentially distressed by a Euro banking crisis. Markets are sceptical about the new scheme The Chancellor announced a £140 billion lending scheme to businesses and households which was met by little excitement in the markets. The scheme will do little to kick start growth - the credit worthy are loathe to borrow and the not so credit worthy cannot borrow anyway. At Thursday night the announcements sounded more like a panic reaction rather the policy planning. On reflection, this is planning for panic should the Euro crisis erupt. Liquidity will be provided into the banking system but the attempt to kick start lending will prove better intentioned than effected. Funding for lending - borrow and thrive? Check out www.johnashcroft.co.uk, Join me on LinkedIn, Twitter or Google+ Page 4Saturday, 16 June 12
  5. 5. The Saturday Economist johnashcroft.co.uk Log In | Register | My Account | iPad App | Saturday June 16th 2012 Manufacturing Output - April Manufacturing output fell by 0.3% in April according to the Office for National Statistics. Output remains some 9% below the peak recorded in 2008 but some 6% above the trough in 2009. Despite capital goods growth of 4.6%, output of consumer non durables fell by a similar amount. Consumer durables output increased by a modest 1.7%. The largest contributions to the fall in manufacturing output were the manufacture of food, drink & tobacco, which fell by 5.7 per cent, followed by other manufacture & repair, which fell by 9.5 per cent. In contrast, the largest upward contribution came from the manufacture of transport equipment, which rose by 8.8 per cent. Manufacturing output is flat .. At best, on trend, the average rate of growth of manufacturing is just 1.5%. The latest figures are a continual set back to an economic policy dependent on growth in exports, investment and manufacturing. The trade figures for April confirm the flaws in the policy as defined hence perhaps the rush to get households borrowing more for the housing market. Housing and Households the key driver of UK growth will fail to deliver until inflation falls, earnings and real incomes are rising. Down by 0.3% year on year. Check out www.johnashcroft.co.uk, Join me on LinkedIn, Twitter or Google+ Page 5Saturday, 16 June 12
  6. 6. The Saturday Economist johnashcroft.co.uk Log In | Register | My Account | iPad App | UK Trade Figures - April Saturday June 16th 2012 The deficit on seasonally adjusted trade in goods was £10.1 billion in April, compared with a deficit of £8.7 billion in March and a deficit of £25 billion in the first quarter of the year. Despite sluggish growth in the UK, the trade deficit is increasing as import growth exceeds the growth of exports. Are the problems in Europe to blame? The deficit in trade in goods with EU countries widened by £0.3 billion to £4.9 billion in the month, compared with a deficit of £4.6 billion in March. Exports fell by £0.9 billion (6.8 per cent) to £12.0 billion, and imports fell by £0.5 billion (3.0 per cent) to £16.9 billion. Trade in goods deteriorates Over 50% of UK exports are still heading to Europe. The slow down in Euroland is clearly affecting trade performance but the contribution is just a small part of the overall problem. The deficit on trade in goods with non-EU countries widened by £1.0 billion to £5.2 billion in April, compared with a deficit of £4.2 billion in March. So much for the car revolution. Exports of cars and chemicals cited as a problem as world trade slowed to just over 2% in the month. As we have long argued, a policy dependent on sterling depreciation will fail to bring about the improvement in the trade balance. The volumes in world trade the real driver of export growth. As export growth stalls. Check out www.johnashcroft.co.uk, Join me on LinkedIn, Twitter or Google+ Page 6Saturday, 16 June 12
  7. 7. The Saturday Economist johnashcroft.co.uk 150 Saturday June 16th 2012 Oil brent crude closed at $97.60 last week 120 90 Oil Price Brent Crude $ Qtr Data $ I II III IV 60 2010 76.35 78.37 77.49 87.28 2011 104.79 116.57 113.57 109.16 30 2012 118.83 109.00 110.00 115.00 Forecasts 0 Our forecasts more bullish 2004 2005 2006 2007 2008 2009 2010 2011 2012 than the World Bank $107 this year. Check out www.johnashcroft.co.uk, Join me on LinkedIn, Twitter or Google+ Page 7Saturday, 16 June 12
  8. 8. The Saturday Economist johnashcroft.co.uk Log In | Register | My Account | iPad App | Latest Economic Indicators Saturday June 16th 2012 Indicator Period Latest Notes, next release Source Inflation CPI April 3.0% ONS Inflation RPI April 3.5% .. ONS Inflation RPIX April 3.5% .. ONS Earnings March 1.6% ONS Retail Sales volume January 2.0% ONS Retail Sales value January 4.4% ONS Unemployment March 2.62 LFS Million trailing 3 months ONS Unemployment % March 8.2% LFS trailing 3 month ONS Claimant count April 1.59m Million ONS PPIs output May 2.8% Manufacturing prices (output) ONS PPIs input May 0.1% Manufacturing prices ( input) ONS GDP growth Q1 2012 -0.3% ONS Manufacturing April -0.9% year on year growth ONS ONS : Office for National Statistics, LFS : Labour Force Survey Check out www.johnashcroft.co.uk, Join me on LinkedIn, Twitter or Google+ Page 8Saturday, 16 June 12
  9. 9. The Saturday Economist johnashcroft.co.uk The Saturday Economist The Saturday Economist is a round up of the week’s economics news for the UK published on the web site johnashcroft.co.uk. The information is also available as a PDF download. The information was originally published in short form in the Sunday Times and Croissants weekly blog post and has been expanded following requests for more information. To receive the weekly STAC e-mail join me on LinkedIn. Details of our current annual The material in the Saturday Economist is based upon information which we forecasts : The UK in Black and consider to be reliable but we do not represent that it is accurate or complete and White Forecasts for the UK it should not be relied upon as such. We accept no liability for errors, or omissions Economy 2012 - 2015 can be of opinion or fact. found on this web site and on slideshare - jkaonline In particular, no reliance should be placed on the comments or trends in financial markets. The publication of this document should not be construed as the giving All views expressed in the Saturday Economist of investment advice. are my own. Information is intended to provide a general outline of the subjects covered. It should neither be regarded as comprehensive Forecasting is fun and subject to frequent revision. nor sufficient for making decisions, nor should it be used in place of professional advice. Neither the Saturday Economist or any representative JKA accept any responsibility for any loss arising Data is adapted from the Office for National Statistics licensed under the Open Government Licence v.1.0. from any action taken or not taken by anyone using this material. Check out www.johnashcroft.co.uk, Join me on LinkedIn, Twitter or Google+ Page 12Saturday, 16 June 12

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