The Saturday Economist johnashcroft.co.uk Saturday, 18 August 2012 Retail sales, inflation, employment rise OTHER NEWS Retail Sales Retail sales were up by 2.8% in July. -------------------------------- Inflation CPI basis 2.6% in July compared to 2.4% in June. ------------------------------ Unemployment Claimant count fell by 5,900 in July - a rate of 4.9%.. ------------------------------ Car Manufacturing Increased by 22% in July no tsunamis assist output. ----------------------------- MPC Minutes August More QE on the way? Minutes suggest more gilt purchases? Economic news this week suggests the economy is not in recession but may be growing by around 1% this year. Rising inflation, falling unemployment, retail sales up and car manufacturing up, this is not consistent with an economy in recession or flat lining for that matter. Our model based on output and employment, suggests the economy grew by around 1% in the second quarter and will grow by around 1.2% for the year as a whole. The economy is not in a double dip or flat. Closing : FTSE : 5,847; 10 Year Gilts 1.67%, Oil Brent Crude $113.16; Gold $1,614; $ 1.569; € 1.2739 In the minutes of the MPC for August, the nine members voted unanimously to maintain base rates at 0.5% and to maintain the level of QE at £375 billion. “For some members the decision was nevertheless more finely balanced, since a good case could be made at this meeting for more asset purchases.” The MPC are placing great hopes on the FLS.
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The Saturday Economist johnashcroft.co.uk
Saturday, 18 August 2012Retail sales, inflation, employment riseOTHER NEWSRetail SalesRetail sales were up by 2.8% in July. --------------------------------Inflation CPI basis 2.6% in July compared to 2.4% in June. ------------------------------Unemployment Claimant count fell by 5,900 in July - a rate of 4.9%.. ------------------------------Car ManufacturingIncreased by 22% in July no tsunamis assist output. -----------------------------MPC Minutes AugustMore QE on the way? Minutes suggest more gilt purchases?
Economic news this week suggests the economy is not in recession but may be growing by around 1% this year.
Rising inflation, falling unemployment, retail sales up and car manufacturing up, this is not consistent with an economy in recession or flat lining for that matter.
Our model based on output and employment, suggests the economy grew by around 1% in the second quarter and will grow by around 1.2% for the year as a whole. The economy is not in a double dip or flat.
In the minutes of the MPC for August, the nine members voted unanimously to maintain base rates at 0.5% and to maintain the level of QE at £375 billion. “For some members the decision was nevertheless more finely balanced, since a good case could be made at this meeting for more asset purchases.” The MPC are placing great hopes on the FLS.
The Saturday Economist johnashcroft.co.uk
Saturday 18 August 2012Car manufacturing up 22% in July Car manufacturing surged by 22% in July and at a rate of 15% for the year as a whole.
Car output rose for the 13th consecutive month, up 22.2% in July and 15.1% for the year-to-date.
Commercial Vehicle output stabilised down 1.3% in the month after a 7.7% fall for the first seven months.
UK engine production was up 0.3% over the year, with a narrow 1.9% downturn in the month.
“Car manufacturing continued to perform well”, said Paul Everitt, SMMT Chief Executive. “While uncertainty in Europe remains a challenge, the £6 billion investment committed to the UK in the last two years delivers long-term growth opportunities. Our products have enormous global appeal.”
Output is likely to hit 1.45 million units this year compared to sales of 2.0 million and peak output of 1.6 million pre recession.
The Saturday Economist johnashcroft.co.uk
Saturday 18 August 2012Surprise rise in inflation in July Inflation is on the rise according to latest data for July.
CPI inflation increased to 2.6% from 2.4% in June and RPI and RPIX inflation increased to 3.2% from 2.8%.
Food and non-alcoholic beverages increased by 2.1%. Alcohol and tobacco prices increased by 5.0% Housing and household services were up by 6.1%. Furniture and household goods increased by 3.5%Health costs were up by 3.%
Communication costs (4.4%), education (5%) Restaurants and hotels (3.2%) were all on the rise.
Respite to inflation was afforded in clothing and footwear 0.1% Transport 1.3% and recreation 0.4%.
Overall goods inflation increased by 1.9% as service sector inflation increased by 3.4%.
Energy costs appear subdued in July but the critical oil price was down 12% compared to July last year.
“Oil prices are on the rise again and service sector inflation is 3.4%.
The 2% target may be elusive this year.”
Inflation CPI basis increased to 2.6% in July compared to 2.4% in June.
RPI and RPIX inflation increased to 3.2% from 2.8%
The Saturday Economist johnashcroft.co.uk
Saturday 18 August 2012Unemployment falls in latest dataUnemployment fell as the claimant rate fell by just under 6,000 in July to 1.59 million and a rate of 4.9%.
The wider LFS survey confirmed a fall of 46,000 in the three months to June to a level of 2.564 million and a rate of 8%.
The employment rate for those aged from 16 to 64 was 71.0 per cent, up 0.4 on the quarter.
There were 29.48 million people in employment aged 16 and over, up 201,000 on the quarter.
Total pay rose by 1.6 per cent on a year earlier, up 0.1 on the three months to May 2012.
Regular pay (excluding bonuses) rose by 1.8 per cent on a year earlier.
The number of full-time workers increased by 130,000 to reach 21.41 million and the number ofpart-time workers increased by 71,000 to reach 8.07 million.
The number of employees increased by 128,000 to 25.02 million as the number of self-employed people
increased by 39,000 on the quarter to 4.20 million. Public sector jobs were 5.90 million in March 2012, down 39,000 from December 2011.
The number of people employed in the private sector in March 2012 was 23.43 million, up 222,000 from December 2011.
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The Saturday Economist johnashcroft.co.uk
Saturday 18 August 2012Retail Sales up 2.8% in July Retail sales in July were up by 2.8% in volume terms and up by 3.1% in value according to the latest data from the Office for National Statistics.
The June volumes were also revised up to 2.6%, so over the last three months retail sales have averaged 2.5%.
Still below the long run average of 3.4% but this is not recession territory.
The average weekly spend for all retailing in July 2012 was £6.7 billion.
This compares with £6.6billion in June 2012 and £6.5 billion in July 2011.
The average spend via the internet was estimated to be £505 million in July 2012 approximately 9% of total retail sales values.
Strongest retail sectors were elusive to define!
Food sales were up by just 1% and clothing sales fell slightly.
Household goods sales were up by just 2%. Online sales are driving retail growth up 14%.
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Saturday 18 August 2012What happened in the world this week
Salute to the EuroInvestors welcomed the statement by Angela Merkel - the Chancellor explained the pledge by the European Central Bank to do whatever it takes to support the euro project was “completely in line” with the views of the Euro leaders even the Finns are in.
The Finns are in ...Finland is totally committed to the euro, its European affairs minister said following comments from its foreign minister that the country was preparing for a break up of the single currency.
Earlier in the week ...Finland’s foreign minister had warned the country is preparing for a full-blown currency crisis as tensions in the eurozone mount.
Finland will not tolerate further bail-out creep, fine words indeed.
Foreign direct investment in China fell 8.7pc in July, the government said, as the economy continues to feel the pinch of slowing global growth and the European debt crisis.
The slowdown in world economic growth, increasing uncertainties and a lack of proper solution to the European debt crisis
were external factors contributing to the decline said ministry spokesman Shen Danyang.
So much for onshoringThe Sensata plant in Freeport is profitable and competitive, but owner, Bain Capital, has decided to ship jobs to China – and forced workers to train their overseas replacements.
The Saturday Economist johnashcroft.co.uk
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Saturday 18 August 2012Professor Milton Keynes column
I have been 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 -0.7 1.7Q3 na 1.8
GrowthGDP in the second quarter fell by 0.8% 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.
The Saturday Economist johnashcroft.co.uk
The Saturday Economist johnashcroft.co.uk
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.
In particular, no reliance should be placed on the comments or trends in financial markets.
The publication of this document should not be construed as the giving of investment advice.
Forecasting is subject to frequent revision Please remember we are forecasting the output of the Office for National Statistics which may, of itself, be subject to revision.
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John K AshcroftData adapted from the Office for National Statistics licensed under Open Government Licence .v.1.0.
