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Scooped by
Graham Watson
onto Macroeconomics: UK economy, IB Economics |
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Car factory shutdowns designed to cope with disruption from Brexit meant the economy contracted in April.
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Borrowers urged not to panic as banks including Barclays, NatWest and HSBC readjust cost of loans
Graham Watson's insight:
And, as if by magic, the uncertainty regarding future interest rates cuts has fed through into mortgage markets, with some lenders raising their fixed-rate mortgages a few fractions of a per cent.
This, of course has implications for consumer spending: in the first place, it raises housing costs and probably reduces consumer spending in this way. Secondly, it's likely to deflate asset prices - such as the stock market - and the negative wealth effect of this is also likely to feed through into lower spending too.
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Shoppers spend more on promotions as Easter lifts sales of chocolate eggs and hot-cross buns
Graham Watson's insight:
Grocery price inflation is slowing and this is likely to feed through into food prices and inflation figures in due course.
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The prospect of home loan rates staying high for longer is not the tonic for lenders’ financial results it once was
Graham Watson's insight:
This article highlights the fact that it seems that mortgage rates are likely to be higher than they have been for much of the recent past, with many seeing 4% as the new normal.
Of course, higher mortgage rates have implications for consumer spending and thus the wider health of the macroeconomy.
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New post-Brexit border checks ‘set to zero’ to avoid what Defra calls risk of serious disruption
Graham Watson's insight:
Who would have thought it? Can we have some Brexiteers onto the Today programme, Newsnight and other current affairs programmes to defend this?
Yet another delay to erecting trade barriers: we're not ready, they risk serious disruption and so on. And if they cause disruption in the short-run, what are the compensating benefits in the long-run?
Another one for the costs of Brexit file.
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IMF says reduction in national insurance may have made cutting UK national debt more difficult
Graham Watson's insight:
And as if the prospect of rates remaining higher wasn't enough, it seems as though the IMF are trying to persuade the UK government not to indulge in any pre-election giveaways either.
What prospect of expansionary policy between now and an election?
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From
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The government talks about taxes coming down but other talk about them going up. Who is right?
Graham Watson's insight:
A primer looking at the Prime Minister's claim that taxes are going down: it's quite good at drawing a distinction between the marginal rate of taxation and average tax rates, without doing so explicitly.
In short, you can lower the marginal rate of tax - as has been the case with National Insurance - but because you've frozen personal allowances, it actually increases the amount of tax paid, and results in tax increasing as a percentage of GDP. Fiscal drag, in short.
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Bank of England will examine CPI figure closely when considering possible interest rate cut
Graham Watson's insight:
Inflation is down again, to 3.2%, the lowest since September 2021. It's disinflation - a fall in the rate of inflation - although prices are still rising. That said, be warned, prices falling is not necessarily a good thing and you should be capable of explaining why.
Whether or not this translates into lower interest rates is more debatable - not least given the Federal Reserve's position on the issue.
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Figures show sales rose 3.5% in March, the first increase above inflation since early in the crisis
Graham Watson's insight:
A boost for retailers with footfall seemingly up over the Easter holiday and sales up 3.5% in March compared with the previous year. What with today's unemployment data pointing in the opposite direction, we're back to economic limbo.
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Food business owners say new EU import tariffs risk pushing smaller firms to the brink.
Graham Watson's insight:
Some very good examples of the impact of the new customs charges on small Scottish businesses, increasing costs for firms in a way that some are going to find untenable, and, as a result, may go out of business. Well done, Leave voters: I can only assume that this is what you voted for.
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The government might be celebrating falling inflation, but higher prices for goods and services are here to stay
Graham Watson's insight:
The cost of living crisis laid bare in the Observer: food, energy, broadband, mobile phone, car insurance and mortgage costs all examined.
I'm afraid that Brexit alone can't account for some of these increases: I suspect that the Competition and Markets Authority (CMA) will be pretty busy in the months ahead. The rises in car insurance, in particular, are out of sync with the rest of Europe by a remarkable degree.
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Former US Fed boss Ben Bernanke criticises failure to admit mistakes and change course
Graham Watson's insight:
Criticism of the forecasting techniques of the Bank of England has come in an independent report into its operation, courtesy of the former Chair of the Federal Reserve, Ben Bernanke.
Not only has he criticised its methods, of gathering information and forecasting, but he's also critical of the conduct of monetary policy arguing that recent incrementalism, and a reticence to raise interest rates more quickly has damaged the economy, contrasting this with the approach of other, bolder central banks.
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Record-breaking rainfall leaves fields under water, threatening this year's harvest yield and quality.
Graham Watson's insight:
This could be Microeconomic - D&S - but I've put it here because I'd like you to think about it in simple terms. How would you show this on a Production Possibility Curve (PPC)?
Then extrapolate: what does a reduction in food security mean for the main macroeconomic objectives: economic growth, inflation, unemployment, the Balance of Payments and inequality. Always, everywhere, economics in action.
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All agree that billions are missing from HMRC coffers but Rachel Reeves may not be looking for it in the right places
Graham Watson's insight:
This Larry Elliott piece looks at the reality of the Labour Party cracking down on tax avoidance: it's not as straightforward as it might seem, and that the reality is that most of the so-called tax gap is due to small businesses underpaying taxation.
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Huw Pill warns inflation could rebound as UK business survey signals economy strengthened over last month
Graham Watson's insight:
As a result of the stubborn nature of UK inflation the Bank of England's Chief Economist has indicated that there's little immediate prospect of a summer cut in interest rates.
It seems as though the MPC consensus is that the relative strength of the labour market is an ongoing concern and that this needs to demonstrate greater weakness before rates are cut, even though it seems as though the UK is recovering from recession.
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From
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An unexpected rise in public borrowing could limit the scope of pre-election tax cuts, say analysts.
Graham Watson's insight:
It never rains but it pours for the current government. Not only are interest rates likely to stay higher for longer, given recent inflation data, but today's government borrowing figures make it clear that there's also going to be less room for pre-election tax cuts too.
According to the article, borrowing "reached £120.7bn in the year to March...£6.6bn more than the government's forecaster predicted." As a result, the national debt is still 98.3% of GDP.
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Trade bodies say ongoing confusion about when checks will come in is ‘incredibly challenging’
Graham Watson's insight:
I'll just leave this here - scandalous, isn't it? And all so predictable.
Brexit is, and was always going to be a farce. And here's more proof.
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The anti-growth coalition, Bank of England and the OBR are among those under fire from Liz Truss
Graham Watson's insight:
I'll save you the trouble.
It will substantiate the assertion of a friend of mine, who was on the OU Reform Club Committee with her: she's "argumentative, aggressive, and not very bright". And since her student days, she's seemingly also become delusional.
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Shift in rate reduction predictions to autumn hits prime minister’s strategy of winning back mortgage payers
Graham Watson's insight:
It looks like today's inflation data is going to mean that interest rate cuts are being put on hold for another month or two, depriving the Prime Minister of a pre-election boost from expansionary policy.
Oh dear. What a pity.
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Separate report suggests number of people living in poverty aged between 60 and pension age has tripled under Tories
Graham Watson's insight:
It seems that poverty among the elderly has dramatically risen under the current government with Labour suggesting that DWP data implies that there are nearly 1m pensioners "living in deprivation". Another way of looking at poverty is its generational effects - both on the elderly and children.
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Growth per head will remain flat this year as the effects of high inflation take time to abate
Graham Watson's insight:
More 'good' news - the IMF is forecasting UK economic growth of 0.5% this year, but what with population growth, it's going to be the case that there's going to be no increase in either per capita growth or living standards for a second year. The UK economy is stagnating.
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From
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The slowing jobs market has raised questions over when the Bank of England might cut interest rates.
Graham Watson's insight:
The latest UK labour market data suggests a slowing economy, although unemployment figures often lag behind economic growth data. However, unemployment is up to 4.2%, from 3.9%, and some are wondering whether this might prompt the Bank of England to cut interest rates sooner rather than later.
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Rules due to come in this month will impose new handling fees – and experts say small suppliers are already being driven away
Graham Watson's insight:
More costs of Brexit, less choice, and fewer small businesses. It's what we voted for apparently.
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Report by former US Federal Reserve boss reveals faulty economic model and reluctance to admit mistakes
Graham Watson's insight:
Larry Elliott's take on the Bernanke Report into the Bank of England's performance: for him, I don't think he's actually as scathing as he might be. I reckon he'd award the Bank a C grade.
I agree with his criticism of the Bank predicating its interest forecasts on what the markets think is going to happen to rates. Given the fact that the MPC contains a number of people who are well-connected in this regard, it strikes me that this is likely to create group-think, and a degree more independence might be more helpful.
From my perspective, I've always thought that the MPC is drawn from a very narrow group of people with very little in the way of a feel for the lives of ordinary people. They would argue that this is part of the remit of the Bank's agents, but I'd disagree; the agents aren't sitting in the room determining the future direction of interest rates, and to me that matters.
So, if the Governor of the Bank of England wants to come calling, I'm sure I could find time to sit on the MPC. I don't think I'd do a job that's any worse than current or former members. And I've met a number of the latter group.
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February growth of 0.1% comes despite retailers being hit by one of wettest starts to a year on record
Graham Watson's insight:
How exciting! The economy grew by 0.1% in February, according to the ONS, meaning that the UK is moving closer to exiting recession. Not only that but January's 0.2% figure has been revised up to 0.3%. It's almost as if we're now able to count the number of angels balanced on a pin head! Hurrah!
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FCA survey tracking bills and credit repayments in January shows many still weighed down by cost of living
Graham Watson's insight:
The cost of living crisis rears its head again, with the news that 7.4m consumers are struggling to pay their bills, which indicates the extent to which income inequality remains an issue, and also tells you that consumer spending is going to be low.
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The latest growth figures suggest that the UK economy has shrunk, largely as a function of lower car production and an easing in stockpiling. It's the second month in a row that this has happened, and there are clearly more headwinds to come.