The Saturday Economist johnashcroft.co.ukBernanke offers more QE Saturday, 15 September 2012Economic news this week, OTHER NEWSIs Bernanke trying to get EmploymentObama re-elected? The Fed Claimany count fell in Augustlaunched a third round of by 15,000.quantitative easing in the US. -------------------------------- Trade in goodsThe plan - to inject $40 billion Deficit fell to £7.1 billion ininto the US economy each July down from £10.1 billion.month until the housing market ------------------------------recovers. Construction Output Construction output fell byThe actions, should put 10% in Julydownward pressure on ---------------------------------longer-term interest rates, Fed makes a movesupport mortgage markets, Markets rallied as the Fed moved to boost output. The The Federal reserve embarkedand help to make broader FTSE closed up over 100 points on the week at 5,915, the on a fresh round of QE.financial conditions more Dow moved to 13,593 up almost 300 points. In Europe the -----------------------------accommodative. The Fed German DAX index closed up 200 points at 7,412. Gilt Base Ratessaid in a policy statement this yields moved 20 basis points higher in Europe, The US and Ten year gilts yields move upweek. the UK. 20 basis points to 1.87Closing : FTSE : 5,915; 10 Year Gilts 1.87%, Oil Brent Crude $116.66; Gold $1,771; $ 1.512; € 1.235
The Saturday Economist johnashcroft.co.ukFed makes the move with QE3 Saturday, 15 September 2012Has Bernanke joined the holdings of longer-Obama election camp? In term securities bya strange move, ten weeks about $85 billionahead of the election, the Fed each month shouldchied launched a third round put downwardof US quantitative easing. pressure on longer- term interestThe Fed’s plan - to inject $40 rates, supportbillion into the US economy mortgage markets,each month until the housing and help to makemarket recovers. broader financial conditions moreThe Committee agreed to accommodative.increase accommodation by The Fed said.purchasing mortgage-backed In Europe the German courts did not block the Draghisecurities at a pace of $40 Markets reacted with bond buying programme clearing the way for thebillion per month. a jump in prices the salvation of the Euro at least in the medium term. S & P popped up 2%These actions, which together and the Dow closed The world is looking a better place as we move into thewill increase the Committee’s 300 points higher. late Autumn period.
The Saturday Economist johnashcroft.co.ukEmployment suggests growth Saturday, 15 September 2012Wednesday the ONS official underlying GDPreleased the latest labour output data.market statistics. Employment in the threeThe claimant count fell by months to July was 29.615,000 to 1,570k in August million up from 29.1from a revised fall of 14,000 million a year ago. Thein July. economy has created half a million new roles despiteThe rate was relatively the loss of 400,000 jobs inunchanged at 4.8% the public sector.but indications are thefall in claimant count 250,000 are self employedunemployment in the third and 320,000 are in part According to the wider LFS based data, thequarter could be almost time work, this may have unemployment rate was 8.1 per cent down 0.1% on the50,000. some impact on labour quarter to July. productivity and output perThis would be consistent worker but the pattern of There were 2.59 million unemployed people, downwith an economy growing employment is much better 7,000 in the three months.by over 1% and at odds with than GDP data suggests.
The Saturday Economist johnashcroft.co.ukTrade data in July .. Saturday, 15 September 2012Trade in goods and Nothing particularlyservices in July. Seasonally remarkable in the month’sadjusted, the UK’s deficit on data other than antrade in goods and services adjustment to the June losswas £1.5 billion in July, of output performance, itselfcompared with a deficit of a result of the bank holiday£4.3 billion in June. and jubilee party.There was a surplus of £5.6 The impact of depreciationbillion on services offset by has had little impact ona deficit of £7.1 billion on trade peformance.trade in goods. Import volumes react toThis compares to a deficit domestic demand rather(trade in goods) of £10.1 than price changes.billion in June and anaverage of £8.8 billion over Changes in relative exportthe prior seven months of prices inhibited by a narrowthe year. manufacturing base and international syndication.
The Saturday Economist johnashcroft.co.ukConstruction output falls 10% in July Saturday, 15 September 2012 On Friday, the ONS The dismal performance released the latest figures for July was heralded in the for construction output in recent CIPS Markit survey July. data. Output in the month was For the rest of the year in down 10% year on year but Q3 and Q4 construction the volume of new work, output may be down by (accounting for almost 10% then 5% respectively two thirds of activity) was before a strong recovery is down almost 15%. manifest in Q1 2013. Maintenance and repairs This is a function of the the output was down by just work out of the fall evident over 1%. from the start of the year rather than a vigorous The march of the makers response to government has ground to a halt and the policy. By the end of call to get Britain Building the year construction is yet to gather momentum. sentiment will be much more positive. Page 5
The Saturday Economist johnashcroft.co.ukWhat happened in the world this week Saturday, 15 September 2012 Bernanke is accused Oil prices closed at $116 of joining the Obama per barrel Brent Crude campaign trail with the basis. announcement of a further round of asset purchases. Despite the slow down in world trade, the basics of The Fed has committed supply and demand will to buy $40 billion of The headline rate of push prices higher as geoDraghi deal gets the mortgage backed securities inflation in India pushed political risks surge.nod September 12th the until market stability higher with the wholesaleGerman constitutional returns and Obama is re prices index rising by 7.6% The implications forcourt, gave its qualified elected presumably. in August compared to UK domestic prices areyes to a big rescue fund 6.9% in July. significant.for troubled members ofthe euro zone. “It is a good India now has a higherday for Germany, and it is inflation rate than China,a good day for Europe,” Brazil or Russia. The risesaid Angela Merkel, in fuel duties did little tothe chancellor, after the help sentiment as foodverdict. So let’s get on with price inflation hit 9%.it. Page 6
The Saturday Economist johnashcroft.co.ukProfessor Milton Keynes column Saturday, 15 September 2012GDP and Claimant Count ComparisonsI am still puzzled by the In this chart the blue line GDP ONS PMKstrength of the employment represents the change in Q4 0.6 0.6data and the apparent GDP year on year and the Q1 -0.2 1.2weakness of the GDP red chart represents the Q2 -0.5 1.7figures as published by quarter on quarter change Q3 na 1.8the Office for National in the claimant count.Statistics writes our residenthead of research Professor It is inverted so that as theMilton Keynes this week. claimaint count increases, the inverted chart falls inMost people still think of line with the GDP change.employment as a laggingindicator of economic The most recent twogrowth but as my chart quarters suggest theexplains, the claimaint estimates for GDP declinecount provides an extremely are at odds with thereliable coincident indicator employment data. Far fromof trends in the economy. falling, the economy may well be growing. Page 7
The Saturday Economist johnashcroft.co.ukMarkets : FTSE 5,915 : DOW 13,593 : Nasdaq 3,183 : DAX 7,412 Saturday, 15 September 2012 FTSE 5,915 + 121 £:$ 1.512 - .090 DJIA 13,593 + 287 £:€ 1.234 - .015 NASDAQ 3,183 + 47 $:€ 1.313 + .035 DAX 7,412 + 198 $:¥ 78.12 + 10 bp CAC 3,581 + 62 Base Rate 0.50% Nikkei 9,159 + 288 10 yr UK 1.97% + 26bp Hang Seng 20,629 + 827 10 yr US 1.87% + 20bp S & P 500 1,466 10 yr Euro 1.72% + 19bp Brent Crude $ 116.66 - 2.41 Copper 383.20 +18.95 WTI Crude $ 99.06 - 2.77 Corn 798.20 + 05.0 Gold $ 1,771 + 34 Wheat 925.00 + 38.0 Silver 5000 $ 3,438 + 67 Cotton 74.80 - 0.65 Platinum $ 1,709 + 10 Page 8
The Saturday Economist johnashcroft.co.ukGrowth Inflation Unemployment Government BorrowingGDP in the second quarter Inflation CPI basis was 2.6% Claimant count in August fell In the first three months tofell by 0.5% year on year as in July. Inflation RPI and by 15,000 to a level of just June, Government was upthe recovery of 2010 petered RPIX increased to 3..2% from under 1.6 million and a rate by £4.5 billion. Borrowingout in 2011. 2.8%. of 4.8%. is likely to exceed the levels achieved in 2011/12.Growth in Q1 fell by 02%. In Manufacturing price inflation The LFS count fell slightly2011 UK growth was up by up by 2.2% in August, latest (three months to July) to a0.8% and 1.8% in 2010 . earnings up by 1.9% in July. level of 2.59 million. 8.1%
The Saturday Economist johnashcroft.co.ukLatest Economic Indicators Saturday, 15 September 2012Indicator Period Latest Source NotesInflation CPI July 2.6% ONSInflation RPI July 3.2% ONSInflation RPIX July 3.2% ONSEarnings July 1.9% ONS Whole economyRetail Sales Volume July 2.8% ONS year on year comparisonRetail Sales Value July 3.1% ONS year on year comparisonUnemployment m July 2.57m ONS LFS millions trailing three monthsUnemployment % June 8.1% ONS LFS per cent trailing three monthsClaimant Count m August 1.570 ONS MillionClaimant Count % August 4.8% ONS per centagePPIs output August 2.2% ONS Manufacturing prices outputPPIs input August 1.4% ONS Manufacturing prices inputGDP change Q2 -0.5% ONS year on year comparisonManufacturing August -0.5% ONS year on year comparison
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