Economic Trends June 2011

708 views

Published on

Economic Trends, a copy of the presentation delivered by Andrew Johnson, Senior Economist at EEF from the CIM East of England Summer Marketing Conference held on 9 June 2011 at ARU, Chelmsford

Published in: Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
708
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
12
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Economic Trends June 2011

  1. 1. CIM Summer Marketing ConferenceUK economic trends and prospectsAndrew Johnson – Senior Economist
  2. 2. OVERVIEW• Recent UK economic history• Fiscal challenge• Growth challenge• Prospects for 2011• Looking ahead to 2012• Key risks
  3. 3. Recent economic historyIn 2008/09 the UK suffered its worst recession in 80 years• Output declined by 6% (2009q3)• Between 2008 and 2009 exports declined by8.6% and imports by 9.1%• Unemployment increased by 2.8pp to 7.9%(2010q1)• The financial system was brought to the brinkof collapse Sources: ONS, OECD
  4. 4. 19 56 -6% -4% -2% 0% 2% 4% 6% 8% 19 Q 60 1 19 Q1 65 19 Q1 Decline in context 70 19 Q1 75 19 Q1 80 1q 19 Q1 85 19 Q1 Recent economic history 90 4q 19 Q1 95 20 Q1 00 20 Q1 05 20 Q1 10 Q 1Source: ONS
  5. 5. Recent economic historyLatest release in GDP growth, % change in output Source: ONS
  6. 6. Recent economic historyLatest BoE Inflation Report (May), CPI fan chart Source: Bank of England
  7. 7. Recent economic history Manufacturing, % change in output 6% 4% 2% 0% -2% -4% -6% -8%-10%-12%-14% 20 2 20 3 20 4 20 1 20 2 20 3 20 4 q1 20 2 20 3 20 4 q1 q q q q q q q q q q 08 08 08 09 09 09 09 10 10 10 10 11 20 20 1q 4q Source: ONS
  8. 8. Fiscal ChallengeBudget 2010, UK structural deficit 2010 c.f. OECD
  9. 9. Fiscal ChallengeBudget 2011, Receipts and expenditure as a % of GDP
  10. 10. Fiscal ChallengeFiscal Mandate• Achieve cyclically-adjusted (structural) balanceby the end of the forecast period (2015/16)• Public Sector Net Debt (PSND) falling by2015/16• OBR to independently judge whether eachbudget means >50% chance of meeting targets
  11. 11. Growth ChallengeRebalancing the economy, contributions to growth annual % change 6 4 2 0 -2 -4 -6 -8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Households Government Investment Inventories Net Trade GDP Source: ONS
  12. 12. Growth ChallengeManufacturers’ concerns with business environment
  13. 13. Growth ChallengeAccumulation of barriers to growth• Level and complexity of tax system• Stock and flow of regulations• Atrophy and distortion of financial sector outside ofbanks• Poor supply and reliability of skills• Uncertainty on climate and energy policy
  14. 14. Growth ChallengeWhat has the government done?• Bringing down corp tax, canceled Labour’s NIrise, introduced Office of Tax Simplification• Red tape challenge• Business Growth Fund, Project Merlin• Demand-led skills system• Climate change and electricity market reforms
  15. 15. Growth ChallengePlan B? • Shaky growth is leading to calls, from some, to move to a ‘Plan B’ • Others endorse govt’s fiscal plans (IMF) • Even if fiscal plans unchanged, plenty of room for action
  16. 16. Prospects for 2011 Domestic side of the economy weak, components of GDP q/q % chg Households Government Inventories2.5 Investment Trade GDP2.01.51.00.50.0-0.5-1.0-1.5-2.0 2010q2 2010q3 2010q4 2011q1 Source: ONS
  17. 17. Prospects for 2011Consumption and investment, forecast % chg q/q 3 2.5 2 1.5 1 0.5 0 2011q2 2011q3 2011q4 2012q1 2012q2 2012q3 2012q4 Consumption Investment Source: Oxford Economics
  18. 18. Prospects for 2011 Exports growth has been strong % Domestic Export 40 30 20 10 0 -10 -20 -30 -40 -50 -60 20 2 q4 20 2 20 4 20 2 20 4 20 2 20 4 q2 20 4 q2 20 4 q2 20 4 q2 q q q q q q q q q q 04 04 05 05 06 06 07 07 08 08 09 09 10 10 1120 20 20 20 20 Source: EEF Business Trends Survey
  19. 19. Prospects for 2011% change in annual output 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2010 2011 2012 Manufacturing Rest of economy GDP Source: ONS
  20. 20. Looking ahead to 2012Economy still expected to recover 2.5 2 1.5 1 0.5 0 2011 2012 March April May Source: HM Treasury survey of independent forecasters
  21. 21. Looking ahead to 2012Interest rates start to rise, Bank rate, % 2.5 2 1.5 1 0.5 0 q1 q2 q3 q4 q1 q2 q3 q4 11 11 11 11 12 12 12 12 20 20 20 20 20 20 20 20 Source: Oxford Economics
  22. 22. Key risksCommodity prices
  23. 23. Key risksExport markets EU (%chg, lhs) Rest of World (%chg, lhs) Total exports (£m, rhs) 20% 74000 15% 72000 70000 10% 68000 5% 66000 0% 64000 -5% 62000 -10% 60000 2010 Q2 2010 Q3 2010 Q4 2011 Q1 Source: ONS, HMRC
  24. 24. Key risksAccess to finance, balance of companies reporting increase(decrease) in availability of credit 5 0 -5% -10 -15 -20 2010q1 2010q2 2010q3 2010q4 2011q1 2011q2 All companies Small companies only Source: EEF

×