The Saturday Economist johnashcroft.co.uk Log In | Register | My Account | iPad App | In this issue : Page No. Saturday July 7th 2012 The week in review 2 Producer Prices in June - prices are falling 3 Rates on hold - but more QE is on the way 4 World trends - The IMF to cut forecasts 5 Oil Price Watch this week - Brent Crude rallies 6 Latest Economic Indicators 8 John Ashcroft The Saturday Economist is Chief Executive of pro.manchester, a director of Marketing Manchester, a member of the Greater Manchester Chamber of Commerce, the AGMA Business Leadership miss Council and a visiting professor at ’t MMU Business School Don specialising in Economics, Corporate Strategy and Business Modelling. Education : London School of Economics London Business John Ashcroft.co.uk School with a PhD in economics from MMU.Saturday, 7 July 12
The Saturday Economist johnashcroft.co.uk Log In | Register | My Account | iPad App | Saturday July 7th 2012 The Week in Review - manufacturing falls, more QE is on the way as base rates stay on hold but the IMF is to cut forecasts. Manufacturing prices fall, pushing retail inﬂation towards target, as output prices fall to 2.3% in June from 2.9% in May. Input prices fall by -2.3% as oil prices and commodity prices fall. Base rates are on hold but more water is thrown on the drowning by the Black Cloud Gang as a further round of QE is announced. The Asset purchase facility is to be boosted by a further £50 billion to £375 billion, That’s 25% of GDP. Why stop there? Christine Lagarde says the world must work together in a great big melting pot of Manufacturing price inﬂation falls to 2.3% economic policy. Forecasts for growth are to be lowered by the IMF later this month. The IMF is due to release its growth forecast for the global economy on July 16. It is expected to be lower than anticipated in the IMF World Economic Outlook published in April. World output was projected to grow 3.5 percent in 2012, recovering to 4.1 percent next year but problems in Europe and elsewhere will push the forecast towards 2.5% in line with the World Bank projection issued last month. Where does that leave our outlook? Slower growth - but no Great Depression. JKA. The world must work together says the IMF John Ashcroft.co.uk Page 2Saturday, 7 July 12
The Saturday Economist johnashcroft.co.uk Log In | Register | My Account | iPad App | Saturday July 7th 2012 Producer Prices June Manufacturing prices were released on Friday by the ONS. The rate of output price inﬂation fell to 2.3% in June from 2.9% in May. Input prices actually fell by -2.3% from a revised 0.0% in the prior month. Is this a good thing, well yes, the long average rates are 2.3% for output prices and over 6% for input prices, the long term rates are consistent with a 2% inﬂation target.. For some, the fall in manufacturing prices may signal a bout of deﬂation is coming and this would be a bad thing. Hence the push for more QE. Will prices fall further, a little but the ﬁgures in June were ﬂattered by a fall in oil prices down by 17% in June compared with last year. Sterling rallied with a 5% rise in the trade weighted Manufacturing output prices 2.3% in June index boosted by a 10% rise against the Euro, offset by a 5% fall against the dollar. The major fall in input prices followed from the fall in world commodity prices as import metal prices fell 10% and other import prices (food for example) were subdued. Where does that leave our forecasts for the end of the year? By the ﬁnal quarter we expect output prices to be around 2.5% to 3% assuming Oil brent crude basis trades around $110 - $115 per barrel. No deﬂation but consistent with a 2% to 2.5% CPI target. Manufacturing input prices -2.3% John Ashcroft.co.uk Page 3Saturday, 7 July 12
The Saturday Economist johnashcroft.co.uk Log In | Register | My Account | iPad App | Saturday July 7th 2012 Base rates on hold but more QE unleashed Thursday the MPC announced base rates were on hold but a further round of QE was on the way with a further £50 billion round announced. A further step in the debt monetization process undertaken, by the Black Cloud Gang. The total rising to £375 billion, that’s 25% of GDP. What will it achieve other than assisting the job of the debt management ofﬁce in peddling gilts for the Chancellor’s £120 billion deﬁcit this year. Ten year gilt yields hit 1.6%, pushing pension funds into a widening yield gap. What will it achieve for the wider economy, I have no idea as our recent Discussion Paper explains. The APF money would be far better spent on the acquisition of SME Bonds or Bank announces a further £50 billion QE round Property Bonds, Ten-Twenty year low coupon term bonds issued by project Merlin banks bought by the Bank of England and guaranteed by Treasury. This would go some way to calming the fears of the Financial Policy Committee now populated by Black Cloud hoodies. Bank of England warns UK banks need more capital screams the headline in The Telegraph on Friday as Phillip Aldrick explains “the FPC judged that overall capitalisation of the banking system was unlikely to be sufﬁcient for stability to be assured”. Excellent, don’t panic just yet Gilt yields fall to 1.6% John Ashcroft.co.uk Page 4Saturday, 7 July 12
The Saturday Economist johnashcroft.co.uk Log In | Register | My Account | iPad App | Saturday July 7th 2012 World Trends - The IMF will reduce forecasts for growth To Secure Recovery, The World Must Work Together, says IMF Chief Christine Lagarde. The global community must work together to meet the challenges thrown up by the global ﬁnancial crisis and to ensure future stability and growth, says the IMF head on a whistle stop world tour. The IMF is due to release its growth forecast for the global economy on July 16. It is expected to be lower than anticipated in the IMF World Economic Outlook published in April. World output was projected to grow 3.5 percent in 2012, recovering to 4.1 percent next year but problems in Europe and elsewhere will push the forecast towards 2.5% in line with the World Bank projection issued last month. Slower growth - but IMF set to cut world growth forecasts no Great Depression. Problems in Europe persist, the recent US jobs data disappoints but the rate cuts in China signal positive intent. Where does that leave our outlook? Slower growth - but no Great Depression. JKA. The world must work together warns the IMF John Ashcroft.co.uk Page 5Saturday, 7 July 12
The Saturday Economist johnashcroft.co.uk Oil Price Watch ...... 150 Saturday July 7th 2012 Oil brent crude closed at $98.19 last week (FT source), as the market bounces from the ﬂoor. 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 118.83 107.57 110.00 115.00 Data Set Forecasts 0 Our forecasts more bullish 2004 2005 2006 2007 2008 2009 2010 2011 2012 than the World Bank $107 this year. John Ashcroft.co.uk Page 6Saturday, 7 July 12
The Saturday Economist johnashcroft.co.uk Log In | Register | My Account | iPad App | Latest Economic Indicators Saturday June 7th 2012 Indicator Period Latest Notes, next release Source Inﬂation CPI May 2.8% ONS Inﬂation RPI May 3.1% .. ONS Inﬂation RPIX May 3.1% .. ONS Earnings April 1.8% ONS Retail Sales volume May 2.0% ONS Retail Sales value May 3.3% ONS Unemployment April 2.62 LFS Million trailing 3 months ONS Unemployment % April 8.2% LFS trailing 3 month ONS Claimant count May 1.59m Million ONS PPIs output June 2.3% Manufacturing prices (output) ONS PPIs input May -2.3% 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 John Ashcroft.co.uk Page 7Saturday, 7 July 12
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 June 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 John Ashcroft 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. John Ashcroft.co.uk Page 8Saturday, 7 July 12
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