GDP

UK GDP maths and monetary policy

April 27, 2011 10:15 am by Chris Giles

For those wanting a primer on how to interpret the 0.5 per cent rise in UK GDP in the first quarter this morning, you could read this piece from the FT yesterday. But I will also summarise the maths and its implications here.

The 0.5 per cent figure suggests the economy stagnated at best in the six months between the third quarter of 2010 and first quarter of 2011 and probably contracted a little. The stagnation bit is easy to see, since the level of GDP in Q3 2010, with an index number of 99.6, is the same as that in Q1 2011.

The “at best” bit comes from the fact that some of the activity that would have taken place at the end of last year, but was disrupted by the snow – distributing goods or maintenance of equipment for example – will have taken place in the first quarter, flattering the latest figures. We don’t know how big this effect was, but can put boundaries on it. At best, the economy stagnated. At worst, if all of the 0.5 per cent of activity lost in the fourth quarter was displaced into the first quarter, the underlying level of activity is now 0.5 per cent lower than that in Q3 2010. Read more

Tags: GDP, interest rates, UK
Posted in Bank of England | Permalink

The Bank of England’s dilemma

March 3, 2011 2:14 pm by Emma Saunders

VAT, energy prices and import prices contributed about 2-4 per cent to headline inflation at the end of last year (blue band in chart, right), according to estimates quoted by the Bank of England. Compare that with a contribution of -0.5-1.3 per cent (green band) from more typical domestic (and more manageable) factors such as wages and producer profits, to catch a glimpse of The MPC’s policy dilemma.

That is the title of Charlie Bean’s speech, just delivered at ABI’s Economics and Research conference in London. Be careful interpreting these numbers: the -0.5-1.3 per cent range of inflation contribution “does not provide an estimate of what inflation would have been if commodity prices, the exchange rate and VAT had all remained at their 2007 levels,” said Mr Bean. Without movements in sterling and global prices, “inflation might have been somewhat higher than indicated by the green swathe”. But they would be unlikely to have pushed inflation “materially” above target. Read more

Tags: charlie bean, GDP, inflation, UK
Posted in Bank of England, Uncategorized | Permalink

When markets and economists disagree

February 11, 2011 11:18 pm by Robin Harding

Professional forecasters have become more optimistic in the Q1 survey by the Philly Fed but I’m not bowled over by their wild enthusiasm.

Tags: forecasts, GDP, inflation, North America
Posted in Federal Reserve | Permalink

Was Q4 GDP weak or strong?

January 28, 2011 11:13 pm by Robin Harding

I went for strong in writing up today’s preliminary Q4 numbers but there was enough going on in the release to argue it either way.

The case for strong is this:

Tags: GDP, North America
Posted in Federal Reserve | Permalink

A two-speed economy is workable

January 26, 2011 1:28 pm by Emma Saunders

Economists at Davos are more optimistic than expected: they think a two-speed economy is sustainable – as long as developing countries move from export-led to consumption-driven model in the longer-term. One suggests a three-speed economy would be a better description. Chris Giles reports.

Tags: GDP, Global
Posted in Uncategorized | Permalink

The German consumer mood

January 25, 2011 1:24 pm by Ralph Atkins

German consumer optimism has brightened further. The GfK research organisation in Nuremberg estimates its “consumer climate” index will rise again in February, reaching a level last seen in the second half of 2007 – before the global financial crisis took its toll. Germans’ “propensity to buy” this month was the highest since December 2006, it reported.

But “propensity to buy” does not mean actually buying. The most recent German retail sales figures have been disappointing. November saw a 2.4 per cent fall compared with October. While economists generally expect 2011 to see a revival in consumers spending, on the back of steep falls in unemployment, rising wages and a general improvement in German confidence, few expect a dramatic surge. Read more

Tags: Europe, eurozone, GDP, Germany, growth
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Stagflation: BoE cheers

January 25, 2011 9:40 am by Chris Giles

In recent weeks, the Bank of England’s problem has been inflation. It is too high at 3.7 per cent in December and going higher. Now the Bank has something apparently worse on its hands: stagflation. The Office for National Statistics has just shocked everyone by saying the UK economy contracted by 0.5 per cent in the final quarter of 2010. Expectations had been for a 0.5 per cent increase.

Nothing could cheer the Monetary Policy Committee more. Now it can bat away suggestions it should be raising interest rates with the comment that this would be nuts as the economy is again contracting. High inflation is nothing to worry about if the economy is still in intensive care. Read more

Tags: GDP, growth, interest rates, recession, UK, UK economy
Posted in Bank of England | Permalink

From FT.com January 18, 2011

Italian central bank expects weak recovery

Italy’s economic recovery will remain weak and below the eurozone average over the next two years, the Bank of Italy forecasts in a report that diverges from more upbeat government predictions while underlining the need for structural reforms.

Noting a slowdown in gross domestic product growth in the last quarter of 2010, the central bank predicted on Tuesday that Italian GDP would grow at a similar pace of 0.9 per cent in 2011 and 1.1 per cent in 2012, boosted by rising exports but held back by weak consumer spending and the government’s austerity programme. Modest growth would not be enough to produce a robust recovery in employment, the bank said. Read more

Tags: Europe, eurozone, GDP, growth, italy
Posted in Uncategorized | Permalink

The good and bad news on the UK economy

November 24, 2010 10:51 am by Chris Giles

As the overall level of growth in the UK continues to be robust – at 0.8 per cent in the third quarter – the detail of the figures just published will keep everyone guessing about the sustainability of that growth. Good news and bad news are evenly balanced and the economy is far from set fair or obviously a basket case. That is why the mushy middle prevails on the Monetary Policy Committee

Good news

Market sector output. Real market sector output grew by 1 per cent in the third quarter, indicating robust demand. It has expanded 3.4 per cent in the year to the third quarter, indicating that the willingness to pay for additional goods and services has been strong since late 2009 and the private sector has been in good shape. This bodes well for the consolidation ahead. (Market sector output represents goods and services produced and sold in markets at meaningful prices. Most private sector activity and public sector stuff such as planning fees are included. Direct provision of free-at-the-point-of-use health and education services are excluded.)
Broad based output gains. In the third quarter, services accounted for half the 0.8 per cent GDP rise, construction a quarter, and production the rest. The expansion was not dominated by one sector, even if construction gains were disproportionate to their size in the economy.
A welcome boost from net trade. When looking at the expenditure contributions to growth, net trade (exports and imports) contributed 0.4 percentage points of the growth, indicating that the trade account is finally helping drive prosperity rather than detracting from it. Both imports and exports grew faster than GDP, but exports grew much faster.

Tags: GDP, monetary policy, UK, UK economy
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Fed expected to slash forecasts tomorrow

November 22, 2010 11:25 am by Emma Saunders

Latest Fed projections for the US economy are expected to have worsened considerably from last quarter. Robin suggests the 2011 growth forecast, due for release tomorrow, will fall to 3-3.5 per cent for next year. Unemployment might rise above 8 per cent in 2012, with long-term unemployment rising by more than a percentage point to 6 per cent. Below is a summary of recent projections with Robin’s figures added to the November row: