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Economic Outlook
Peter Andrews Agent for Greater London, Bank of England
Construction Industry Council 23 May 2012
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Agency for Greater London
Prospects for activity and inflation
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Agency for Greater London
MAY GDP projection; mkt interest rate expect’ns and £325 bn asset purchases
FEB GDP projection; mkt interest rate expect’ns and £325 bn asset purchases
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Agency for Greater London
MAY CPI inflation projection; mkt interest rate expect’ns and £325 bn asset purchases
FEB CPI inflation projection; mkt interest rate expect’ns and £325 bn asset purchases
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Agency for Greater London
Risks/issues
• Euro area: extreme outcome excluded, but impact of threat on asset prices, confidence and activity included
• Consumption and real incomes
• Productivity
• Costs, prices and margins (special survey)
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Agency for Greater London
Money, credit and asset prices
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Agency for Greater London
Sterling exchange rates
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Agency for Greater London
Chart 1.9 Public term issuance by the major UK lenders
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Agency for Greater London
Corporate credit availability by firm size(a)
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Agency for Greater London
Commercial real estate credit availability(a)
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Agency for Greater London
New Bank Rate tracker mortgage rate, Bank Rate and an estimate of banks’ marginal funding cost
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Agency for Greater London
Nationwide house prices: annual changes to 2012 Q1
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Agency for Greater London
Demand
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Agency for Greater London
UK goods exports and surveys of export orders
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Agency for Greater London
UK import penetration and relative import prices(a)
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Agency for Greater London
Household consumption and real income
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Agency for Greater London
Household saving ratio
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Agency for Greater London
Business investment to GDP ratio(a)
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Agency for Greater London
Cyclically-adjusted primary deficit
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Agency for Greater London
Output and supply
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Agency for Greater London
Output in 2012 Q1 compared with a quarter earlier and a year earlier
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Agency for Greater London
‘Normal’ seasonal shut-down periods during winter months
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Agency for Greater London
Shut down periods over the most recent winter
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Agency for Greater London
Public and private sector employment
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Agency for Greater London
Whole-economy and sectoral labour productivity(a)
(a) Output per hour.(b) Continuations of pre-recession trends calculated by projecting forward labour productivity
from 2008 Q2 using the average quarterly growth rate between 1997 Q2 and 2008 Q1.
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Agency for Greater London
Survey indicators of capacity utilisation by sector
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Agency for Greater London
Why is productivity weak?
Candidate stories
• Labour hoarding: retain skills and anticipate recovery. Helped by bank forbearance
• Tighter credit conditions: shortage of working capital, lack of finance for new/dynamic firms
• Low investment and some failures/capital scrapping
• Fall in hours worked → less learning by doing
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Agency for Greater London
(a) Output per hour. Subsectors are ordered by the difference between 1998–2007 average productivity growth and 2008–2011 Q3 average productivity growth. The number in parentheses is each sector’s nominal share in 2008 services value added. Shares do not sum to 100 due to rounding.
Services labour productivity growth by subsector(a)
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Agency for Greater London
Costs and prices
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Agency for Greater London
CPI, RPI and RPIX inflation
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Agency for Greater London
Contributions to CPI inflation(a)
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Agency for Greater London
Contributions to private sector unit labour costs
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Agency for Greater London
Corporate profit share (excl financial corporations and oil)
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Economic Outlook
Peter Andrews Agent for Greater London, Bank of England
Construction Industry Council 23 May 2012