Tuesday, 15 February 2011

Bad news week

This week a lot of UK economic data will be published, and most of it is likely to be bad.

A few minutes ago the ONS released the inflation numbers for January. CPI was 4.0% and RPI 5.1%.

So CPI is now exactly twice the Bank of England's target. Last week a sanguine MPC, which already knew today's CPI number, decided there was still no need to take any action to head off inflation. In fact the great and the good regard inflation in UK as close to zero. Vince Cable, the Business Secretary, and Mervyn King the Governor of the BoE are both on the record as saying that all UK inflation is due to "one off" and "external" factors such as the rise in VAT, the fall in sterling, and the rising cost of imported commodities such as crude oil and food. Taking a very narrow view they have decided that factors outside their control don't count so can be ignored.

Of course these factors aren't really outside their control. It's true they can't make the oil price go down, but they can make sterling go up (by raising the bank rate) which is just as good from our point of view. As for factors genuinely outside their control (eg the failed Russian grain harvest) well they should be offsetting this by bearing down harder on factors they can control.

Mervyn King has three more years until he retires, at which time he will qualify for a pension of £220,000 pa, RPI-linked. This blog considers it very unlikely he will refuse his RPI-linked pay rises just because the cost of living is increasing by one-off or external factors!

Moving on, tomorrow the Nationwide will release its consumer confidence survey result. This is expected to be gloomy. The unemployment data, claimant count and number of unemployed, will be released. We will also see the Bank of England's Inflation Report - likely to be a bland whitewash, written by people not much personally affected by real world data.

Then on Thursday the CBI publishes its industrial orders expectation. Manufacturing has been the one sector of the UK economy showing some resistance to the current economic woes so this number might not be too bad. Unfortunately manufacturing is only 12% of our economy.

Then next week we have quite a lot of data on housing and house prices; and a possible revision to the -0.5% GDP number for the last quarter of 2010. It's unlikely to be revised enough to make it go positive though.

However if you want good news - well the bank reporting season has just started. Barclays has kicked off by announcing a £6bn profit on the year, 30% up on last year Of course this is mainly good news if you're a banker.


Anonymous said...

Awesome post. Do you mind if I ask what your source is for this information?

Nationalist said...

Thanks. The source is a profusion of websites, newspapers, TV, radio, etc. Just keeping an ear to the ground really.