The saturday economist 1st september

The Saturday Economist johnashcroft.co.uk

Saturday, 1 September 2012Action this day - a V sign to plan AOTHER NEWSLending to individualsLatest lending data pretty flat up by just 0.7% in July. --------------------------------Consumer CreditDown in July as twelve month rate fell by 0.6%. ------------------------------House PricesRallied rebound in August according to Nationwide. --------------------------------- Vauxhall shut downAfter the excitement of July reality hits as Euro demand slumps-----------------------------Money Supply - JulyAn economy flatlining.

Economic news this week, Latest forecasts from the CBI and the Chambers of Commerce suggest the economy will shrink by between -0.3% and -0.5% for the year as whole before rallying slightly to 1.2% in 2013.

Inflation is expected to remain close to the Bank of England target by the end of the year at around 2%.

Effectively the economy is flatlining rather that shrinking, A classic liquidity trap with interest rates at the zero bound domestic demand stifled and firms unwilling to invest.

Closing : FTSE : 5,711; 10 Year Gilts 1.66%, Oil Brent Crude $114.57; Gold $1,669; $ 1.581; € 1.261

John Cridland, the CBI Director General is calling for the government to be more Churchillian and take immediate action on key insfrastructure projects. ’In the war Churchill said “Action this day”, and that is what we need now.’ said the CBI DG.


Saturday, 1 September 2012UK lending pretty flat ...Total lending to individuals rose by £0.9 billion in July, compared to the previous six-month average increase of £0.8 billion.

The twelve-month growth rate was unchanged at 0.7%. Within total lending, lending secured on dwellings rose by £1.1 billion, compared to the previous six-month average increase of £0.8 billion.

The three-month annualised growth rate was unchanged at 0.5% whilst the twelve-month growth rate was unchanged at 0.8%. Money Supply

The household sector’s holdings of M4 increased by £6.8 billion in July, compared to an average monthly increase of £4.3 billion in the previous six months.

The annual growth rate was 4.6%.

M4 lending (excluding the effects of securitisations etc) to the household sector increased by £1.0 billion in July,

compared to an average monthly increase of £0.6 billion in the previous six months. The annual growth ratewas 0.7%.M4 lending (excluding the effects ofsecuritisations etc.) excluding intermediate OFCs was £1.863.3 approximately 120% of GDP.


Saturday, 1 September 2012Consumer Credit fell in July ...Consumer credit decreased by £0.2 billion in July compared to the previous six-month average of £0.0 billion.

The twelve-month growth rate was -0.6%. Within consumer credit, credit card lending decreased by £0.1 billion and other loans and advances decreased by £0.1 billion.

The number of loan approvals for house purchase (47,312) increased in July but was lower than the previous

sixmonth average 50,729.

The number of approvals for remortgaging 25,273 also increased in July but was lower than theprevious six-month average (28,649).

The number of approvals for other purposes similarly rose in July (15,778) and wasbelow the previous six-month average (18,035).

Credit card lending fell by £0.1billion, consumer credit decreased by £0.2 billion.


Saturday, 1 September 2012UK House prices rebound in August?UK house prices bounced in August according to the latest data from Nationwide.

The price of a typical UK house increased by 1.3% in August but prices remain just under 1% lower than a year ago. The price of a typical home is £164,729.

Mortgage approvals and first time buyer volumes remain some 50% below the period 2005 - 2007.

The FTB share of volume remains pretty constant around 38% of activity.


Saturday, 1 September 2012Vauxhall shuts down production Vauxhall is to cease production for a week in response to a fall in demand in the eurozone.

After the excitement of the July car production figures up by over 20% year on year according to the SMMT, reality hit the car market in August as Vauxhall announced a plant shut down in two UK factories.

So much for the march of the makers, the problems in Europe will result in a September shut down in Ellesmere Port and Luton.

According to the Telegraph, the shutdowns are in stark contrast to Jaguar Land Rover which has moved to a 24 hour production schedule to meet growing demand for the Evoque.

Demand for UK cars is likely to hit 2 million units this year - production may peak around 1.45 million units.

Eighty per cent of output is destined for exports, the UK will remain a net importer of around 0.8 million vehicles and a lot of car parts in addition.

Saturday, 1 September 2012What happened in the world this week

Bernanke stimulusUS stock markets rose as after Ben Bernanke signalled he would consider another round of QE to stimulate growth.

Despite an upward revision to US GDP data for Q2, unemployment at 8.3% was of “grave concern”. It is an election year after all.

Return to Gold?Madness is in the air in the US as Peter Schiff of Euro Pacific Capital suggested the US would return to the gold standard.

Can the barbarous relic make a comeback priced at $2000 an ounce. Not really Peter. Hopefully we have been through all this before.

Indian EconomyThe economy grew 5.5% in the second quarter, government data showed on Friday, just above the 5.3 percent posted in the three-month period ending in March and slightly better than economists’ expectations in a Reuters poll.

Weak demand in the West has hit exports. as ratings agencies Fitch and Standard & Poor’s threaten to downgrade India’s sovereign ratings to junk

Euro unemployment The number of people out of work in the eurozone hit 18 million for the first time in July. The jobless rate stood at 11.3%.


Saturday, 1 September 2012Professor Milton Keynes column

I am still puzzled by the strength of the employment data and the apparent weakness of the GDP figures as published by the Office for National Statistics writes our resident head of research Professor Milton Keynes this week.

Most people still think of employment as a lagging indicator of economic growth but as my chart explains, the claimaint count provides an extremely reliable coincident indicator of trends in the economy.

In this chart the blue line represents the change in GDP year on year and the red chart represents the quarter on quarter change in the claimant count.

It is inverted so that as the claimaint count increases, the inverted chart falls in line with the GDP change.

The most recent two quarters suggest the estimates for GDP decline are at odds with the employment data. Far from falling, the economy may well be growing.

GDP ONS PMKQ4 0.6 0.6 Q1 -0.2 1.2Q2 -0.5 1.7Q3 na 1.8


GDP and Claimant Count Comparisons

Saturday, 1 September 2012Markets : FTSE 5,711 : DOW 13,091 : Nasdaq 3,049 : DAX 6,971


FTSE 5,711 - 65DJIA 13,091 - 67NASDAQ 3,049 - 20 DAX 6,971 - 00CAC 3,413 - 20

Base Rate 0.50%10 yr UK 1.66% +13 bp10 yr US 1.55% -14 bp10 yr Euro 1.34% - 01 bp

Brent Crude $ 114.57+ 0.98WTI Crude $ 96.56+ 0.30Gold $ 1.690 + 21.0Silver 5000 $ 3,168 + 107 Platinum $ 1,541 - 10

£ : $ 1.587 + 00 bp £ : € 1.261 - 00 bp$ : € 1.258 + 00 bp $ : ¥ 78.10 - 6 bp

Nikkei 8840 - 231Hang Seng 19,483 - 397

Copper 345.80 - 2.4Corn 802.00 - 1.0Wheat 871.00 +2.0Cotton 76.40 +1.8


GrowthGDP in the second quarter fell by 0.5% year on year as the recovery of 2010 petered out in 2011.

Growth in Q1 fell by 02%. In 2011 UK growth was up by 0.8% and 1.8% in 2010 .

UnemploymentClaimant count in July fell by 5,900 to a level of just under 1.6 million and a rate of 4.9%.

The LFS count fell slightly (three months to June) to a level of 2.56 million. 8.0%

Government BorrowingIn the first three months to June, Government was up by £4.5 billion. Borrowing is likely to exceed the levels achieved in 2011/12.

Inflation Inflation CPI basis was 2.6% in July. Inflation RPI and RPIX increased to 3..2% from 2.8%.

Manufacturing price inflation fell to 1.7% in July, latest earnings up by 1.8% in May.


Latest Economic Indicators Saturday, 1 September 2012

Indicator Period Latest Source NotesInflation CPI July 2.6% ONSInflation RPI July 3.2% ONSInflation RPIX July 3.2% ONSEarnings June 1.6% ONS Whole economy

Retail Sales Volume July 2.8% ONS year on year comparison

Retail Sales Value July 3.1% ONS year on year comparison

Unemployment m June 2.56m ONS LFS millions trailing three months

Unemployment % June 8.0% ONS LFS per cent trailing three months

Claimant Count m July 1.593 ONS Million

Claimant Count % July 4.9% ONS per centage

PPIs output July 1.7% ONS Manufacturing prices output

PPIs input July 1.3% ONS Manufacturing prices input

GDP change Q2 -0.5% ONS year on year comparison

Manufacturing July -4.3% ONS year on year comparison


The Saturday Economist is a round up of the week’s economics news for the UK 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.

The material in the Saturday Economist is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact.

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The publication of this document should not be construed as the giving of investment advice.

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John K AshcroftData adapted from the Office for National Statistics licensed under Open Government Licence .v.1.0.

The saturday economist 1st september

Business

Transcript of The saturday economist 1st september