- The difference between the RPI and CPI inflation measures has been an issue for the UK government. Around 75-100bps of the gap is due to differences in the formulas used to calculate price changes.
- In 2010, changes to how clothing prices were collected for the CPI resulted in greater month-to-month variability and increased the gap between RPI and CPI inflation. This highlighted the need to address the unjustified causes of the formula effect.
- The UK Statistical Authority initiated a program called MFE to identify, understand and remove unjustified causes of the formula effect gap. They are consulting on options to reduce or eliminate the gap between RPI and CPI inflation measures.
The document discusses the Retail Price Index (RPI) and Consumer Price Index (CPI), the two main inflation measures in the UK. It notes that historically the RPI was used more widely, but the CPI is now used as the inflation target by the Bank of England. The wedge between the RPI and CPI inflation rates has increased in recent years due to differences in their methodologies and components, particularly related to housing. The Office for Budget Responsibility projects the long-term wedge between the two measures to be around 1.0-1.4% going forward based on various fiscal changes.
Etude PwC sur les écarts salariaux (2013)PwC France
http://pwc.to/16P5AWX
L'analyse de PwC repose sur les estimations des niveaux relatifs de salaires mensuels moyens faites par l'Organisation internationale du travail (OIT ou "ILO" en anglais), avec une projection d'ici 2030 réalisée à partir des résultats de la dernière étude "The World in 2050" (Le monde en 2050) de PwC.
NHS finances: the challenge all political parties need to face - updated tabl...The Health Foundation
View the full set of charts and tables from our 2015 briefing 'NHS finances: the challenge all political parties need to face' - some of the data was updated in May 2015 and this slidepack reflects those updates.
Bernard Looney, Chief Executive Officer of bp, provides a recap of bp's new strategy and financial frame that was introduced on August 4th. The strategy focuses on three areas: low carbon electricity and energy, convenience and mobility, and resilient and focused hydrocarbons. It is underpinned by partnering with others, integrating energy systems, and driving digital innovation. The financial frame aims to support the energy transition with capital allocation priorities, a resilient balance sheet, and disciplined investment process. The goals are to deleverage to $35 billion net debt, maintain a strong credit rating, and allocate over 20% of capital to the energy transition by 2025.
Using the data, explain two likely causes of the forecast of slower growth for the UK economy
Examine two difficulties facing economists when forecasting economic growth
After two years of recession, Russia's economy is projected to return to growth in 2017 as higher wages boost consumption and lower interest rates support investment. However, structural issues continue to hinder diversification, and the recovery remains dependent on stable oil prices. Fiscal and monetary policy should be further eased to support the recovery, though fiscal space is limited without economic reforms. The strength of the recovery will be constrained by a lack of structural reforms and poor business climate inhibiting diversification from oil.
The document discusses the impact of the COVID-19 pandemic on the Indian economy. It outlines five key economic indicators: GDP growth rate, inflation, unemployment, interest rates, and industrial output. GDP growth was estimated to be 0.4% for fiscal year 2021 compared to the previous year. Inflation has increased as production has fallen due to the pandemic. Unemployment rose to 8.6% in April 2021 from 6.7% previously. Interest rates were reduced by banks as the stock market and production levels declined. Industrial output also decreased with fewer employees able to work due to infections and lockdowns.
The document discusses the Retail Price Index (RPI) and Consumer Price Index (CPI), the two main inflation measures in the UK. It notes that historically the RPI was used more widely, but the CPI is now used as the inflation target by the Bank of England. The wedge between the RPI and CPI inflation rates has increased in recent years due to differences in their methodologies and components, particularly related to housing. The Office for Budget Responsibility projects the long-term wedge between the two measures to be around 1.0-1.4% going forward based on various fiscal changes.
Etude PwC sur les écarts salariaux (2013)PwC France
http://pwc.to/16P5AWX
L'analyse de PwC repose sur les estimations des niveaux relatifs de salaires mensuels moyens faites par l'Organisation internationale du travail (OIT ou "ILO" en anglais), avec une projection d'ici 2030 réalisée à partir des résultats de la dernière étude "The World in 2050" (Le monde en 2050) de PwC.
NHS finances: the challenge all political parties need to face - updated tabl...The Health Foundation
View the full set of charts and tables from our 2015 briefing 'NHS finances: the challenge all political parties need to face' - some of the data was updated in May 2015 and this slidepack reflects those updates.
Bernard Looney, Chief Executive Officer of bp, provides a recap of bp's new strategy and financial frame that was introduced on August 4th. The strategy focuses on three areas: low carbon electricity and energy, convenience and mobility, and resilient and focused hydrocarbons. It is underpinned by partnering with others, integrating energy systems, and driving digital innovation. The financial frame aims to support the energy transition with capital allocation priorities, a resilient balance sheet, and disciplined investment process. The goals are to deleverage to $35 billion net debt, maintain a strong credit rating, and allocate over 20% of capital to the energy transition by 2025.
Using the data, explain two likely causes of the forecast of slower growth for the UK economy
Examine two difficulties facing economists when forecasting economic growth
After two years of recession, Russia's economy is projected to return to growth in 2017 as higher wages boost consumption and lower interest rates support investment. However, structural issues continue to hinder diversification, and the recovery remains dependent on stable oil prices. Fiscal and monetary policy should be further eased to support the recovery, though fiscal space is limited without economic reforms. The strength of the recovery will be constrained by a lack of structural reforms and poor business climate inhibiting diversification from oil.
The document discusses the impact of the COVID-19 pandemic on the Indian economy. It outlines five key economic indicators: GDP growth rate, inflation, unemployment, interest rates, and industrial output. GDP growth was estimated to be 0.4% for fiscal year 2021 compared to the previous year. Inflation has increased as production has fallen due to the pandemic. Unemployment rose to 8.6% in April 2021 from 6.7% previously. Interest rates were reduced by banks as the stock market and production levels declined. Industrial output also decreased with fewer employees able to work due to infections and lockdowns.
After a nine month decline, consumer confidence has risen in the third quarter of 2017 in a sign that consumers are showing resilience at a time when Brexit and other factors could be causing uncertainty. This quarter-on-quarter growth has occurred against a well-publicised backdrop of high levels of unsecured debt and rising inflation.
CBO provides summaries of its health care analysis methods and recent work. It evaluates health care proposals using a 10-year horizon, examining insurance coverage, health care spending projections, and more. Recent reports analyzed the uninsured, health care prices, and single-payer proposals. CBO also provides cost estimates and scores legislation on issues like surprise billing, the ACA, Medicare expansions, and drug pricing. It describes how it uses modeling, behavior assumptions, and a 10-year window in its analyses.
Annual inflation in Latvia declined to 0.6% in June due to falling energy and food prices. Bank loan portfolios increased for the first time in eight months driven by corporate lending. Merchandise exports continued to grow with machinery and chemicals seeing the fastest increases, though exports to Russia declined as other markets like Lithuania and the UK expanded. Latvijas Banka held a discussion on boosting productivity to support sustainable economic growth above 2-3%, noting the need for government strategy and education reforms to increase competitiveness.
This document is a presentation by Douglas Elmendorf, the Director of the Congressional Budget Office, about CBO's analysis of health care policy. It discusses CBO's objective, nonpartisan approach and how it analyzes the effects of policies on the federal budget, state budgets, costs for beneficiaries, and health care outcomes. It also examines key types of federal health care policies that CBO studies, such as ways to improve population health, cut federal subsidies, change how Medicare providers are paid, and make structural changes to programs like Medicare.
This document contains a summary of national economic indicators and forecasts for the US hotel market from 2010 to 2014:
- Hotel occupancy is forecast to increase from 54.6% in 2009 to 62.3% in 2014, while average daily rates are expected to decline slightly in 2010 before increasing each year thereafter. Revenue per available room is forecast to rise 4.6% in 2010 and between 5.9-10.6% annually through 2014.
- Recent improvements in employment and personal income levels have boosted hotel demand growth in 2010 to an estimated 7.3% compared to 4.7% previously forecast. However, hotel operators continue to struggle raising room rates.
- By market segment, midscale and economy
Douglas Elmendorf, director of the Congressional Budget Office, presented CBO's economic outlook. CBO projects that the labor market recovery will continue slowly as structural issues and long-term unemployment impact participation rates. Potential GDP growth is estimated to average 2.1% through 2024 while actual GDP growth is projected to average 2.5% as the output gap closes. Inflation and interest rates are expected to remain low. The budget deficit is projected to decline but debt held by the public will continue rising as a share of GDP.
The organized sector in India created 346,000 jobs between July and September 2011 and is expected to add another 326,400 by end 2011, according to the latest findings of Ma Foi Randstad Employment Trends Survey – Wave 3.
The survey was conducted among 676 companies across 13 industry segments panning 8 Indian cities. The feedback was gathered from the top HR personnel and senior management of companies, who shared valuable insights on the job creation during the last (July – September) and the current (October – December) quarters of 2011.
The current slowdown in the economy and increasing domestic inflation has resulted in sectoral variation in the employment outlook among sectors and although new jobs continue to be added, it is at a slower pace. According to the survey, the Healthcare sector continues to lead in job generation by adding 60,400 jobs in Q3 (July – September) 2011, followed by Hospitality sector with 48,400 jobs and IT & ITeS sector with 46,600 jobs during the same period.
This is however lesser than the numbers (Healthcare - 63,800 / Hospitality - 54,400 / IT & ITeS - 55,500) predicted at the beginning of the quarter three. These sectors are expected to continue as the lead job generators in the coming quarter with Healthcare expecting to add 58,700 jobs followed by Hospitality & ITeS adding 40,000 plus jobs each.
Among the cities, Mumbai added 28,500 jobs, followed by Delhi & NCR adding 27,000 and Chennai adding 15,500. However, the total job generation by these 3 cities was lower by 6,100 jobs, against the original prediction (Mumbai - 32,300 / New Delhi & NCR – 27,900 / Chennai – 16,900) at the beginning of Q3. These cities are expected to generate a total of 69,200 jobs in the current quarter.
Despite GDP being flat in Q2, downside risks to growth still exist. Three key factors pose risks: (1) low FDI due to global risk aversion will impede growth, (2) government spending cuts to narrow the fiscal deficit will put pressure on the economy, and (3) weakening domestic demand from rising unemployment and limited lending will negatively impact private consumption. Flat GDP also came from a large drop in investments and consumption. Surveys were mixed with consumer confidence improving but business climate declining. The current account deficit is adjusting due to falling imports outpacing exports.
This presentation shows the key findings from the 2020 OECD Business and Finance Outlook which focuses on sustainable and resilient finance, in particular the environmental, social and governance (ESG) factors that are rapidly becoming a part of mainstream finance. It evaluates current ESG practices, and identifies priorities and actions to better align investments with sustainable, long-term value – especially the need for more consistent, comparable and available data on ESG performance. The COVID-19 pandemic has further highlighted the urgent need to consider resilience in finance, both in the financial system itself and in the role played by capital and investors in making economic and social systems more dynamic and able to withstand external shocks. Find out more at https://oe.cd/bizfin
Sanofi reported results for Q3 2015 with sales growing 3.4% at constant exchange rates. Business EPS grew 6.1% at constant exchange rates. While diabetes sales declined 6.6% due to lower sales of Lantus in the US, other businesses such as Genzyme, vaccines, and Merial showed solid sales growth. Praluent was launched in the US and Europe for cholesterol treatment.
This document contains a mark scheme for an economics exam covering several topics:
1. Increased globalization, implications of declining non-renewable energy resources, and factors affecting UK international competitiveness.
2. It provides evaluation criteria for student responses, including the number of points and examples of evaluation required to achieve different scoring levels.
3. Sample exam questions cover reasons for trade restrictions, implications of increased protectionism, price differences in the eurozone, and barriers to UK euro adoption related to housing markets.
The document is a statement from E.ON AG responding to the European Commission's Green Paper on a European Strategy for Sustainable, Competitive and Secure Energy. E.ON welcomes many of the Green Paper's goals but expresses concerns that some proposals contradict the principle of open and competitive energy markets. Specifically, E.ON is worried that targets for renewable energy and energy mixes could distort investments. E.ON calls for removing barriers to integrated energy markets in Europe and for allowing market forces rather than political mandates to drive investment and innovation.
The document is a 2014 economic survey of India by the OECD that makes several recommendations:
1. India's economy is recovering but more reforms are needed to sustain growth above 8%, including reducing subsidies, increasing infrastructure investment, and tax reform.
2. Structural barriers have hampered growth and job creation, especially in manufacturing, and parts of the banking system are vulnerable.
3. Increasing opportunities for women could boost growth by over 2% by raising equity and the number of quality jobs.
4. Public health care is poor for most Indians and increased spending is recommended.
This presentation discusses proposals to reduce federal spending on military health care. It summarizes proposals from the Department of Defense and the Military Compensation and Retirement Modernization Commission to restructure TRICARE by consolidating plans and encouraging more efficient care consumption. It also examines Congressional Budget Office options to slow cost growth through increased cost sharing and better disease management that could reduce spending by $18-90 billion and $0.02-0.15 billion respectively over 10 years. The presentation outlines CBO's approach to estimating costs and effects of policy changes on the federal budget.
Presentation by Wendy Edelberg at the Peterson Institute for International Economics conference on Labor Market Slack: Assessing and Addressing in Real Time
CBO makes baseline economic and budget projections covering the next 10 years and also the next 30 years. The projections incorporate the assumption that current laws generally do not change. To produce the 30-year economic projections, CBO uses its policy growth model, which relies on a standard economic framework that focuses on the inputs that drive growth in the supply side of the economy: the amount of labor, the productive services provided by capital, and total factor productivity.
Presentation by Wendy Edelberg, an Associate Director for Economic Analysis at CBO, and Jeffrey Werling, Assistant Director of CBO's Macroeconomic Analysis Division, at the 2019 Social Security Technical Panel.
Monetary policy aims to control inflation and maintain price stability. It uses interest rates and money supply to influence aggregate demand in the economy. Interest rates affect borrowing costs for businesses and consumers. Lower rates boost spending while higher rates have the opposite effect. The document discusses various charts related to inflation projections, GDP growth, government borrowing, household savings, and other economic indicators relevant for monetary policy decisions.
In CBO’s projections, economic output is expected to grow by 2.3 percent in 2019, supporting strong labor market conditions that feature low unemployment and rising wages. After 2019, economic growth averages 1.8 percent per year, which is less than the historical average.
CBO estimates that the federal budget deficit for 2019 will be $960 billion. Under current law, budget deficits are projected to average $1.2 trillion a year between 2020 and 2029, boosting debt held by the public to 95 percent of GDP in that year—its highest level since just after World War II.
The document summarizes the Ma Foi Randstad Employment Trends Survey (MEtS) for the fourth quarter of 2011 and projected trends for the first quarter of 2012. The survey polled 639 companies across 13 sectors to assess employment trends in the organized sector. Key findings included expected increases in employment in sectors such as financial services, IT, and healthcare, while manufacturing saw more muted growth. The report analyzed trends by sector, salary increases, new hire experience and functions.
Everybody is talking about Environmental, Social and Governance (ESG) nowadays,
however, it’s not immediately apparent what the real implications are for
medium-sized companies. Gábor Szendrői, Managing Partner, and Judit Pókos,
Organizational Development Manager, at Concorde MB Partners – IMAP Hungary
took a deep dive into the current regulations, as well as conducted a series of
interviews with SPAR Hungary, a large food retailer and MOL, an international oil
group, along with the Hungarian National Bank, Hungarian Stock Exchange and
other several key players in the Hungarian economy, in order to better understand
what ESG really means in terms of obligations and repercussions for mediumsized
companies. They share their findings on the indirect, yet highly important
aspects of ESG regulations with Creating Value.
Inflation Hedging and the Change in Indexation from RPI to CPI - Survey ResultsRedington
The document summarizes the results of a survey conducted by Redington and Pension Corporation on UK final salary pension schemes. Key findings from the survey include:
- The majority of defined benefit pension schemes are highly vulnerable to future inflation increases as less than 20% have at least 50% of their inflation-linked pensions backed by inflation-linked assets.
- 64% of actuaries and 39% of trustees believe schemes will carry out a buy-out or buy-in within the next three years.
- 91% of trustees said they would consider better asset-liability matching over the next three years.
After a nine month decline, consumer confidence has risen in the third quarter of 2017 in a sign that consumers are showing resilience at a time when Brexit and other factors could be causing uncertainty. This quarter-on-quarter growth has occurred against a well-publicised backdrop of high levels of unsecured debt and rising inflation.
CBO provides summaries of its health care analysis methods and recent work. It evaluates health care proposals using a 10-year horizon, examining insurance coverage, health care spending projections, and more. Recent reports analyzed the uninsured, health care prices, and single-payer proposals. CBO also provides cost estimates and scores legislation on issues like surprise billing, the ACA, Medicare expansions, and drug pricing. It describes how it uses modeling, behavior assumptions, and a 10-year window in its analyses.
Annual inflation in Latvia declined to 0.6% in June due to falling energy and food prices. Bank loan portfolios increased for the first time in eight months driven by corporate lending. Merchandise exports continued to grow with machinery and chemicals seeing the fastest increases, though exports to Russia declined as other markets like Lithuania and the UK expanded. Latvijas Banka held a discussion on boosting productivity to support sustainable economic growth above 2-3%, noting the need for government strategy and education reforms to increase competitiveness.
This document is a presentation by Douglas Elmendorf, the Director of the Congressional Budget Office, about CBO's analysis of health care policy. It discusses CBO's objective, nonpartisan approach and how it analyzes the effects of policies on the federal budget, state budgets, costs for beneficiaries, and health care outcomes. It also examines key types of federal health care policies that CBO studies, such as ways to improve population health, cut federal subsidies, change how Medicare providers are paid, and make structural changes to programs like Medicare.
This document contains a summary of national economic indicators and forecasts for the US hotel market from 2010 to 2014:
- Hotel occupancy is forecast to increase from 54.6% in 2009 to 62.3% in 2014, while average daily rates are expected to decline slightly in 2010 before increasing each year thereafter. Revenue per available room is forecast to rise 4.6% in 2010 and between 5.9-10.6% annually through 2014.
- Recent improvements in employment and personal income levels have boosted hotel demand growth in 2010 to an estimated 7.3% compared to 4.7% previously forecast. However, hotel operators continue to struggle raising room rates.
- By market segment, midscale and economy
Douglas Elmendorf, director of the Congressional Budget Office, presented CBO's economic outlook. CBO projects that the labor market recovery will continue slowly as structural issues and long-term unemployment impact participation rates. Potential GDP growth is estimated to average 2.1% through 2024 while actual GDP growth is projected to average 2.5% as the output gap closes. Inflation and interest rates are expected to remain low. The budget deficit is projected to decline but debt held by the public will continue rising as a share of GDP.
The organized sector in India created 346,000 jobs between July and September 2011 and is expected to add another 326,400 by end 2011, according to the latest findings of Ma Foi Randstad Employment Trends Survey – Wave 3.
The survey was conducted among 676 companies across 13 industry segments panning 8 Indian cities. The feedback was gathered from the top HR personnel and senior management of companies, who shared valuable insights on the job creation during the last (July – September) and the current (October – December) quarters of 2011.
The current slowdown in the economy and increasing domestic inflation has resulted in sectoral variation in the employment outlook among sectors and although new jobs continue to be added, it is at a slower pace. According to the survey, the Healthcare sector continues to lead in job generation by adding 60,400 jobs in Q3 (July – September) 2011, followed by Hospitality sector with 48,400 jobs and IT & ITeS sector with 46,600 jobs during the same period.
This is however lesser than the numbers (Healthcare - 63,800 / Hospitality - 54,400 / IT & ITeS - 55,500) predicted at the beginning of the quarter three. These sectors are expected to continue as the lead job generators in the coming quarter with Healthcare expecting to add 58,700 jobs followed by Hospitality & ITeS adding 40,000 plus jobs each.
Among the cities, Mumbai added 28,500 jobs, followed by Delhi & NCR adding 27,000 and Chennai adding 15,500. However, the total job generation by these 3 cities was lower by 6,100 jobs, against the original prediction (Mumbai - 32,300 / New Delhi & NCR – 27,900 / Chennai – 16,900) at the beginning of Q3. These cities are expected to generate a total of 69,200 jobs in the current quarter.
Despite GDP being flat in Q2, downside risks to growth still exist. Three key factors pose risks: (1) low FDI due to global risk aversion will impede growth, (2) government spending cuts to narrow the fiscal deficit will put pressure on the economy, and (3) weakening domestic demand from rising unemployment and limited lending will negatively impact private consumption. Flat GDP also came from a large drop in investments and consumption. Surveys were mixed with consumer confidence improving but business climate declining. The current account deficit is adjusting due to falling imports outpacing exports.
This presentation shows the key findings from the 2020 OECD Business and Finance Outlook which focuses on sustainable and resilient finance, in particular the environmental, social and governance (ESG) factors that are rapidly becoming a part of mainstream finance. It evaluates current ESG practices, and identifies priorities and actions to better align investments with sustainable, long-term value – especially the need for more consistent, comparable and available data on ESG performance. The COVID-19 pandemic has further highlighted the urgent need to consider resilience in finance, both in the financial system itself and in the role played by capital and investors in making economic and social systems more dynamic and able to withstand external shocks. Find out more at https://oe.cd/bizfin
Sanofi reported results for Q3 2015 with sales growing 3.4% at constant exchange rates. Business EPS grew 6.1% at constant exchange rates. While diabetes sales declined 6.6% due to lower sales of Lantus in the US, other businesses such as Genzyme, vaccines, and Merial showed solid sales growth. Praluent was launched in the US and Europe for cholesterol treatment.
This document contains a mark scheme for an economics exam covering several topics:
1. Increased globalization, implications of declining non-renewable energy resources, and factors affecting UK international competitiveness.
2. It provides evaluation criteria for student responses, including the number of points and examples of evaluation required to achieve different scoring levels.
3. Sample exam questions cover reasons for trade restrictions, implications of increased protectionism, price differences in the eurozone, and barriers to UK euro adoption related to housing markets.
The document is a statement from E.ON AG responding to the European Commission's Green Paper on a European Strategy for Sustainable, Competitive and Secure Energy. E.ON welcomes many of the Green Paper's goals but expresses concerns that some proposals contradict the principle of open and competitive energy markets. Specifically, E.ON is worried that targets for renewable energy and energy mixes could distort investments. E.ON calls for removing barriers to integrated energy markets in Europe and for allowing market forces rather than political mandates to drive investment and innovation.
The document is a 2014 economic survey of India by the OECD that makes several recommendations:
1. India's economy is recovering but more reforms are needed to sustain growth above 8%, including reducing subsidies, increasing infrastructure investment, and tax reform.
2. Structural barriers have hampered growth and job creation, especially in manufacturing, and parts of the banking system are vulnerable.
3. Increasing opportunities for women could boost growth by over 2% by raising equity and the number of quality jobs.
4. Public health care is poor for most Indians and increased spending is recommended.
This presentation discusses proposals to reduce federal spending on military health care. It summarizes proposals from the Department of Defense and the Military Compensation and Retirement Modernization Commission to restructure TRICARE by consolidating plans and encouraging more efficient care consumption. It also examines Congressional Budget Office options to slow cost growth through increased cost sharing and better disease management that could reduce spending by $18-90 billion and $0.02-0.15 billion respectively over 10 years. The presentation outlines CBO's approach to estimating costs and effects of policy changes on the federal budget.
Presentation by Wendy Edelberg at the Peterson Institute for International Economics conference on Labor Market Slack: Assessing and Addressing in Real Time
CBO makes baseline economic and budget projections covering the next 10 years and also the next 30 years. The projections incorporate the assumption that current laws generally do not change. To produce the 30-year economic projections, CBO uses its policy growth model, which relies on a standard economic framework that focuses on the inputs that drive growth in the supply side of the economy: the amount of labor, the productive services provided by capital, and total factor productivity.
Presentation by Wendy Edelberg, an Associate Director for Economic Analysis at CBO, and Jeffrey Werling, Assistant Director of CBO's Macroeconomic Analysis Division, at the 2019 Social Security Technical Panel.
Monetary policy aims to control inflation and maintain price stability. It uses interest rates and money supply to influence aggregate demand in the economy. Interest rates affect borrowing costs for businesses and consumers. Lower rates boost spending while higher rates have the opposite effect. The document discusses various charts related to inflation projections, GDP growth, government borrowing, household savings, and other economic indicators relevant for monetary policy decisions.
In CBO’s projections, economic output is expected to grow by 2.3 percent in 2019, supporting strong labor market conditions that feature low unemployment and rising wages. After 2019, economic growth averages 1.8 percent per year, which is less than the historical average.
CBO estimates that the federal budget deficit for 2019 will be $960 billion. Under current law, budget deficits are projected to average $1.2 trillion a year between 2020 and 2029, boosting debt held by the public to 95 percent of GDP in that year—its highest level since just after World War II.
The document summarizes the Ma Foi Randstad Employment Trends Survey (MEtS) for the fourth quarter of 2011 and projected trends for the first quarter of 2012. The survey polled 639 companies across 13 sectors to assess employment trends in the organized sector. Key findings included expected increases in employment in sectors such as financial services, IT, and healthcare, while manufacturing saw more muted growth. The report analyzed trends by sector, salary increases, new hire experience and functions.
Everybody is talking about Environmental, Social and Governance (ESG) nowadays,
however, it’s not immediately apparent what the real implications are for
medium-sized companies. Gábor Szendrői, Managing Partner, and Judit Pókos,
Organizational Development Manager, at Concorde MB Partners – IMAP Hungary
took a deep dive into the current regulations, as well as conducted a series of
interviews with SPAR Hungary, a large food retailer and MOL, an international oil
group, along with the Hungarian National Bank, Hungarian Stock Exchange and
other several key players in the Hungarian economy, in order to better understand
what ESG really means in terms of obligations and repercussions for mediumsized
companies. They share their findings on the indirect, yet highly important
aspects of ESG regulations with Creating Value.
Inflation Hedging and the Change in Indexation from RPI to CPI - Survey ResultsRedington
The document summarizes the results of a survey conducted by Redington and Pension Corporation on UK final salary pension schemes. Key findings from the survey include:
- The majority of defined benefit pension schemes are highly vulnerable to future inflation increases as less than 20% have at least 50% of their inflation-linked pensions backed by inflation-linked assets.
- 64% of actuaries and 39% of trustees believe schemes will carry out a buy-out or buy-in within the next three years.
- 91% of trustees said they would consider better asset-liability matching over the next three years.
This document summarizes a study analyzing the effects of increasing the Canada Pension Plan (CPP) contribution rate on the labor market. The study uses a macroeconomic model called FOCUS to forecast the response. The model predicts that a 1% increase in the CPP rate would lead to:
1) A decrease in real GDP, consumption, and investment over the next 5 years as workers' take-home pay is reduced.
2) Higher unemployment and lower real wages as employers adjust by hiring fewer workers and raising prices.
3) Potential inflation as employers pass costs to consumers, though monetary policy responses could dampen this effect.
CBO uses several models to analyze the effects of fiscal policy. In CBO’s view, changes in fiscal policy affect the economy in both the short and long term:
Short-term effects are driven by changes in the demand for goods and services (such as consumption and investment) and changes in supply-side factors (such as growth in productivity and the supply of labor), as well as by the interactions between them.
Long-term effects are primarily driven by changes in supply-side factors such as national saving, productivity, and people’s incentives to work, save, and invest.
The life-cycle growth model (also called an overlapping-generations, or OLG, model) is one model that CBO uses to estimate the long-term effects of changes in fiscal policy. CBO uses the model to analyze the effects of fiscal policy on the following:
People’s incentives to work and save; the distribution of income, wealth, consumption, and taxes across households; and
the well-being of different generations of households.
The life-cycle growth model is one model that CBO uses to estimate the long-term effects of changes in fiscal policy. For example, the model can analyze the effects of changes to the Social Security system.
The document discusses the implications of changing the inflation index used for statutory indexation of UK pensions from RPI to CPI. It provides background on the difference between the RPI and CPI baskets and historical differences in their rates. It summarizes views from various parties on expected long-term differences between RPI and CPI inflation. The document also examines the impact of the change on pension schemes, insurers, and hedging strategies. A survey of actuaries and trustees finds most expect CPI to be 0.5-1% lower than RPI long-term but strategies for schemes that can switch to CPI vary.
This document discusses the implications of changing the inflation index used for UK pensions from RPI to CPI. It provides background on the differences between RPI and CPI, results from a survey of actuaries and trustees on their views of the impact, and risk management strategies for schemes given the change. The majority of schemes are not fully hedged against inflation risk and few plan to automatically move to using CPI as their index. There is uncertainty around the long term difference between RPI and CPI inflation.
Red views inflation-linked-bonds-issuance-and-pensions-liabilities-january-2013Redington
This document discusses the growth of the UK inflation-linked bond market and pensions' inflation-linked liabilities. While the inflation-linked bond market has quadrupled since 2005, it remains much smaller than pension schemes' inflation-linked liabilities. This mismatch is pushing real yields lower and limiting pension schemes' ability to match inflation risk. The document examines alternative sources of inflation-linked assets that pension schemes should consider to better match liabilities, such as infrastructure investments.
This document provides a quarterly update on the UK pension plan de-risking market in Q4 2012. It summarizes regulatory developments like changes to RPI/CPI calculations and reductions to the annual and lifetime pension allowances. It reviews recent de-risking transactions including bulk purchase annuities and longevity swaps. It also looks ahead to expected continued strong activity in buy-ins and potential growth in the longevity swap market in 2013 as more insurers enter.
This is a study attempting to statistically measure the impact of Government policies on the economy and the stock market. The “causal” Government policies considered will include:
Fiscal Policy, entailing Budget Deficit spending;
Monetary Policy with the Federal Reserve managing the Federal Funds rate; and
Monetary Policy with the Federal Reserve conducting large purchases of securities (Treasuries, MBS);
The dependent or impacted macroeconomic variables affected by the above Government policies will include:
The overall economy (RGDP);
Inflation (CPI);
Unemployment Rate; and
Stock market.
1) The document discusses the effects of three different types of fiscal policy shocks in eurozone countries using the MARMOTTE economic model: an increase in government expenditure, a reduction in corporate profit taxes, and a reduction in wage taxes.
2) For an increase in government expenditure, the model shows higher inflation in the short run as demand increases, which the ECB fights by raising interest rates. This leads to lower consumption, investment, employment and potential output in the long run. Prices are higher in the long run as well.
3) For a reduction in corporate profit taxes, the model shows higher investment, employment, potential output, and consumption over time. This leads to initial higher inflation followed
This document provides an introduction and outline for Chapter 2 of the textbook Macroeconomics. It discusses key concepts that will be covered in the chapter, including GDP, the expenditure and value added approaches to calculating GDP, price indexes like CPI and PPI, the unemployment rate, and real vs nominal variables. It provides suggestions for instructing students on these topics, such as deriving important equations and identities and relating the economic indicators to current events. The goal is to help students understand national income accounting and how it can be used to analyze the macroeconomy.
Focus on fiscal policy – balanced budget fiscal expansiontutor2u
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RPI VS. CPI - Magic New Formula will Lead to Shrinking Wedge
1. RPI VS. CPI
MAGIC NEW FORMULA WILL LEAD TO SHRINKING WEDGE
OCTOBER 2012
2. www.redington.co.uk/www.pensioncorporation.com 1
Executive Summary
Background
The difference between RPI and CPI as inflation measures has been a statistical nuisance to
understand and explain for the UK government for some time.
The difference stems from two factors:
1) Composition; CPI excludes housing and council tax
This has historically accounted for the larger part of the difference though the
effect can be in either direction.
2) Formula Effect
This has accounted for a smaller part of the difference, but the effect consistently
biases RPI above CPI. The effect increased in January 2010 to around 100bps,
driven largely by changes to the methodology in the measurement of clothing
and footwear 1
.
.
The Consumer Prices Advisory Committee (CPAC), whose role is to advise the UK
Statistical Authority (UKSA) on the measurement of inflation, has initiated a managing the
formula effect (MFE) programme to “identify, understand and remove unjustified causes of
the formula effect gap”. This is important as approximately 75-100bps of the “wedge”
between CPI and RPI is derived from the difference in the formula chosen to assess and
collect data.
In light of their findings, the CPAC are in consultation to reduce and potentially eliminate the
gap through data stratification and/or changing the current RPI methodology. Four
options are being assessed ranging from “do nothing” to “full alignment between RPI and
CPI”. Expected from 2013, it is anticipated that there will be some convergence with the
effect of reducing the RPI. General market expectation is a long term fall in RPI of around
50-75bps. The 15-year RPI expectation implied by index-linked gilts market has fallen to
around 2.35% p.a which is 70bps below its peak from its peak in April this year and about
50bps below the position on 18 May 2012 when the consultation was announced.
Possible impact
Any moves to narrow the RPI/CPI wedge could impact:
Issuers of index-linked bonds – both Government and private sector
Buyers who may start pricing in a “political risk” of further future changes to
calculation methodologies.
Holders of the £177billion of index-linked gilts (“linkers”) in issuance
1
ONS – CPI and RPI: increased impact of the formula effect in 2010
3. www.redington.co.uk/www.pensioncorporation.com 2
RPI swaps participants
Pension schemes with RPI liabilities
Pensioners with RPI-linked benefits
Key considerations for pension schemes
This possible change, like the previous move to change statutory indexation from RPI to
CPI, highlights the need for pension schemes to fully understand the financial implications of
inflation on their liabilities and to hedge them.
Lower inflation and expectations of future inflation will, other things being equal, lead to a
decrease in scheme liabilities. To the extent that schemes have hedged their exposure to
inflation, they will of course neither participate in the positive effects of falling inflation or the
negative effects of rising inflation.
The Redington/PIC survey published in 2011 highlighted that on average, UK pension
schemes had hedged only 25% of their inflation exposure. This leaves them significantly
exposed to moves in inflation.
Recent Developments
Latest September CPAC minutes announced a consultation commencing 8 October
2012 to invite users’ views on the options for the way RPI is calculated. The options
presented were:
1. No change
2. Change approach to averaging prices for some categories
3. Change approach to averaging prices for all categories that use the
CARLI or arithmetic averaging approach (see section 1 for more
details)
4. Change RPI so formulae fully align with CPI
The consultation is expected to run to the end of November 2012 at which point, the
CPAC will reconvene to consider the responses including any recommendations by
the National Statistician.
Market pricing is likely to build in changes when they become likely, ahead of actual
implementation.
Recent fall in market implied inflation (20-25bps) between April 2012 and 1 October
2012 could be attributed in part to expectations of CPAC action.
4. www.redington.co.uk/www.pensioncorporation.com 3
Next Steps
If changes were to be proposed, these would be introduced with the annual update of
the RPI when it is published on 19 March 2013.
Although the Chancellor of the Exchequer must gives its final approval to any
proposed changes to RPI methodology should the Bank of England find them
“materially detrimental to the interests of the holders” of index-linked gilts, this is not
an insurmountable condition to getting the RPI to narrow towards CPI.
It is unclear whether there has been any precedent for what constitutes “materially
detrimental” in such circumstances. However, changing RPI and by implication
lowering it towards CPI would potentially bring into opposition the interests of linker
holders and HM Treasury. Assuming the CPI target is not revised higher to
compensate the loss of the formula effect wedge, then all other things being equal,
the future value of RPI cashflows (and hence linkers, and breakeven inflation swaps)
should fall.
5. www.redington.co.uk/www.pensioncorporation.com 4
Table of Contents
1. BACKGROUND .............................................................................................................. 5
2. THE ONS, CLOTHING AND WEDGES.......................................................................... 7
3. ENTER CPAC ................................................................................................................. 8
4. CONCLUSION .............................................................................................................. 11
6. www.redington.co.uk/www.pensioncorporation.com 5
1. Background
History of CPI vs. RPI2
Fundamental differences between the Consumer Price Index (CPI) and Retail Price Index
(RPI) as measures of inflation can be outlined as follows:
1. Composition Effect – Housing costs and council tax are not included in CPI,
whereas it is included within RPI.
2. Formula Effect - CPI uses a geometric mean of relative prices whereas RPI uses
either an arithmetic mean of relative prices OR a ratio of average prices between
months.
The key point is that the differential or “wedge” between the CPI and RPI has meant that for
a 2% CPI target in steady state, you can expect a higher RPI level of c.100bps3
. This is
partly a mathematical effect. The gap in individual years is volatile and can be materially
higher or lower than 100bps. Indeed, CPI has exceeded RPI in several individual years. But
averaged over the long term RPI (if methodology is unchanged) is very likely to exceed CPI.
The Formula Effect
The first few steps of the calculation of inflation between two periods involve the collection of
a number of price quotes in both periods from retailers or suppliers. These quotes are then
in some way averaged and a relative change established from one period to the next.
There are several mathematical approaches to the averaging and ratio calculation, which are
used both within the RPI and CPI methologies in addition to standard weighted averaging :
CARLI – Average of price relatives
Takes the ratio of a matched pair of prices in both periods and takes the
arithmetic average of all ratios in a well defined group of products
JEVONS – Ratio of average prices
Geometric mean of price ratios or ratio of geometric mean prices
DUTOT – Ratio of average prices
Takes an arithmetic average in both periods, of all prices in a well defined
group of products and takes the ratio of those averages
Source: ONS user engagement July 2012
2
Please refer to section 3 of our December 2011 paper - “UK Final Salary Pension Schemes: Inflation Hedging
and the change in Indexation from RPI to CPI survey results”, which discusses these differences and their
contribution to CPI/RPI basis risk in more detail.
3
ONS: Economic and fiscal outlook March 2011.
7. www.redington.co.uk/www.pensioncorporation.com 6
The application of the different methodologies as a proportion of the RPI and CPI is
compared below:
CPI RPI
30% JEVONS 25% CARLI
30% DUTOT 30% DUTOT
40% Weighted average 45% Weighted average
Source: ONS user engagement July 2012
The formula effect arises due to the difference in the JEVONS and CARLI methodologies
used within 25-30% of each index. A large part of the methodologies behind each index are
in fact the same.
Other countries around the world, particularly the EU, use methodologies similar to the
JEVONS.
8. www.redington.co.uk/www.pensioncorporation.com 7
2. The ONS, Clothing and Wedges
Back in 2010, the Office for National Statistics (ONS) changed the methodology for
collecting clothing prices. They applied a less stringent standard to allowing items to enter
the clothing basket by allowing price comparisons to be included where there had been a
small change to the characteristics of a piece of clothing from one month to the next. The
reasoning behind this being - fashions change, so why only include items that are stuck on
the rails from last month? In addition, seasonal items were also included (boots, beachwear
etc) rather than only items that were likely to be featuring in the basket throughout the year.
Sale items were also included in the price quotes.
The impact of the 2010 changes in including changing fashions and seasonal items was to
make the basket of goods more variable month on month and that variability broadly
translates into a larger CPI vs. RPI wedge. This is because, while the RPI and CPI have the
same clothing basket, increased variability accentuated the formula gap by increasing the
dispersion of the price relatives. In monetary terms, the 2010 changes were seen by some
investment banks as causing the move in size of the formula effect from approximately
50bps since 2009, to 100bps in 2011 of RPI over CPI4
. At the time, the changes were
intended as a way of drawing more items into the “basket” to create a more representative
sample for RPI/CPI calculations.
4
Morgan Stanley – February 2012: A New RPI-CPI Wedge?
9. www.redington.co.uk/www.pensioncorporation.com 8
3. Enter CPAC
The Consumer Prices Advisory Committee (CPAC) began investigating the formula effect
in May 2011. This became a programme of managing the formula effect (MFE) with the
purpose to “identify, understand and remove unjustified causes of the formula effect gap
between the CPI and RPI”5
.
The minutes of the July 2012 CPAC meeting noted that the CPAC are making progress with
the MFE programme. Any recommendations from the CPAC to change the UK inflation
measures in light of their findings could have implications for several areas if such
recommendations are then adopted by the ONS and approved by the Bank of England
(BOE) and UK Government.
Minutes Release – Impact on Gilt Breakeven Inflation
Figure 1: 15-Year Gilt Breakeven Inflation (as at 2 October 2012)
Source: Bloomberg, Redington
In the two weeks following the release of the CPAC minutes on 18 May, 15-year breakeven
inflation dropped by more than 25bps in anticipation of a narrowing gap between the RPI
and CPI. Though the downward trend continues, other factors have also weighed on the
decline of breakeven rates such as the renewal of BoE quantitative easing programme and
recent sharp falls in oil prices. US and European markets have also seen sliding inflation
from respective policy interventions interacting with economic outlook.
5
CPAC Papers – April 2012 meeting: Progress Update on Managing the Formula Effect
2.3
2.4
2.5
2.6
2.7
2.8
2.9
3.0
3.1
%
18 May 2012: CPAC
minutes released
18 Sep 2012: CPAC
minutes released
10. www.redington.co.uk/www.pensioncorporation.com 9
What can you “improve” if you want to have a smaller formula effect?
Stratification
One way of managing down the price variability is to stratify the data. For instance, by
differentiating between supermarkets, departments stores, discount outlets, online etc rather
than simply by “independent” and “multiple” retail outlets as is currently the case.
Unfortunately, stratification by itself only removes a small part of the formula effect.
Formula
The second way of reducing the formula effect is to change the methodology. For example,
by calculating RPI using the geometric rather than the arithmetic average.
Out of the September CPAC meeting, a consultation document is to be published on 8
October 2012 to invite users’ views on a range of options, ranging from no change to a full
alignment of the RPI formulae to CPI6
.
It is important to note that there is more than one change being proposed here. Firstly
stratification and secondly changing the actual calculation for RPI from an arithmetic mean to
geometric mean. Although both will have the impact of reducing the formula effect, the
compositional impact remains from housing prices in RPI. This had been anticipated by the
CPAC and in June 2012, the ONS announced a consultation on the inclusion of housing
costs in CPI7
.
Hurdles to RPI changes
There are hurdles to simply changing RPI methodologies, not least the impact on the UK
index-linked gilts market. The formal process differs for some traditional 8-month lag linkers
versus the newer 3-month lag linkers, however, in summary the parties involved in the
decision process are the UK Statistical Authority, the Bank of England and, ultimately, the
Chancellor of the Exchequer.
Bondholder Protection
The Statistics and Registration Service Act which covers changes to RPI provides some
protection to bondholders. Investors holding the traditional 8-month index-linked gilts will be
able to redeem their bonds. However, it seems they would only receive the accrued index
ratio to date. In the current low yield environment, redeeming these bonds which, in most
cases, had been issued with a coupon higher than current rates, would mean the investor
will receive a price less than the actual market value of the bond.
6
ONS – CPAC September 2012 Meeting Summary Note
7
ONS: Consultation on the recommended method of reflection owner occupiers’ housing costs in a new
additional measure of consumer price inflation, and the strategy for Consumer Price statistics
11. www.redington.co.uk/www.pensioncorporation.com 10
However, the protection for the 3-month linker holders is less than that of the 8-month linkers
and in summary, there is nothing in the documents that prevents a change to the index.
Nevertheless, before making any changes to the RPI, the UKSA must “consult the BOE as
to whether the change constitutes a fundamental change in the index which would be
materially detrimental to the interests of the holders” of index-linked gilts. If the BOE does
consider the changes to be materially detrimental then the UKSA may not make the changes
without approval from the Chancellor of the Exchequer.
It is unclear whether there has been any precedent for what constitutes “materially
detrimental” in such circumstances. However, changing RPI and by implication lowering it
towards CPI would potentially bring into opposition the interests of linker holders and HM
Treasury. Assuming the CPI target is not revised higher to compensate the loss of the
formula effect wedge, then all other things being equal, the future value of RPI cashflows
(and hence linkers, and breakeven inflation swaps) should fall.
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4. Conclusion
Where does it lead?
The face value of the UK linker market stands at £177bn8
and given the potential cost and/or
need for compensating bond holders, one would think that much will depend on approval
and consultation. However, given the level of access of the CPAC to the Bank of England
and HM Treasury to discuss the issue, this gives the impression this process is being taken
seriously and that legislation has a chance of passing.
If the CPAC is successful in achieving its mandate of “identifying and eliminating unjustified
differences” between CPI and RPI, the formula effect will effectively be eliminated, and a
major precedent will have been set.
Key considerations for Pensions
At a fundamental level, the indices are alternative measures which is why we have two
rather than one inflation index. Without getting into the argument here of which is a better
representation of the cost of living for retirement benefits, the likely effects of eliminating
“unjustified” differences from the formula effect are:
The convergence of the RPI and CPI index, most likely in the direction of RPI
decreases rather than CPI rises
Market expectations of moves in inflation will continue to be priced and reflected
within the respective bonds and swaps markets
While liabilities remain indexed against the RPI, index-linked gilts and RPI swaps will
continue to function as liability matching instruments.
Although the extent and timing of the changes are liable to remain uncertain in the coming
months, the narrowing of the RPI to CPI wedge highlights the reality that general inflation
risk poses a much greater risk to most schemes than the basis risk between the two. The
industry revisits a question raised by the previous move to change statutory indexation from
RPI to CPI; are trustees / sponsors truly aware of the overall financial implications of inflation
on their pension scheme liabilities?
Lower actual inflation as well as expectations of future inflation will, other things being equal,
lead to a decrease in scheme liabilities. To the extent that schemes have hedged their
exposure to inflation, they will neither participate in the positive effects of falling inflation or
the negative effects of rising inflation.
At first thought, there may be an inclination to wait in the idea that inflation hedging will be
cheaper in the near future, given the anticipated fall in the relative index. However, markets
also react to information and there is evidence that inflation markets (e.g. Index-linked gilts,
8
DMO – June 2012: Index-linked gilts in issue.
13. www.redington.co.uk/www.pensioncorporation.com 12
swaps) have already begun to price in the possible changes. Attempting to call the inflation
market is therefore no easier now than it was before.
The Redington/PIC survey published in 2011 highlighted that on average, UK pension
schemes had hedged only 25% of their inflation exposure. Irrespective of the outcome of the
current consultation, this leaves them significantly exposed to moves in inflation.
The priority of these schemes should be to increase overall levels of inflation protection.
There is a risk that the current uncertainty over the RPI calculation method will lead to
inaction in the hope of cheaper hedging opportunities in the future. Instead, schemes should
recognise that inflation is one of their largest unhedged risks. As demonstrated by the break-
even charts, hedging instruments such as index-linked gilts and inflation swaps have already
allowed for the expected/possible change in RPI calculation methodology.
A more significant problem posed may be the limited supply of hedging instruments
available on the market. Currently, versus a total pensions liability of c.£7 trillion9
, the UK
only has £335 billion of inflation-linked gilts, c.£30 billion of UK corporate index-linked bonds
(e.g. utility companies), and a further estimated £100 billion in the inflation swap market.
9
ONS, A fuller picture of the UK’s funded and unfunded pension obligations, April 2012