UK Next Week s Agenda and Wrap Up, Dec 24 Jan 4

Transcription

1 Next Week s Agenda and Wrap Up, Dec 24 Jan 4 - Headlines for the UK and global economy - Wrap up - Next week s agenda - Financial overview - Government bond yields - Financial forecast - The economy - Chart of the week - News and statements during the week 21 December, 2012 Merry Christmas and a happy New Year Helena Trygg, , hetr01@handelsbanken.se

2 Headlines for the UK and key yglobal highlights g UK Consumer prices in November- the largest upward pressures to annual inflation came from food & non-alcoholic beverages (principally bread & cereals and vegetables) and housing & household services (particularly domestic gas and electricity) it and the largest downward d pressures came from motor fuels and furniture, household h equipment & maintenance. Output price 'factory gate' annual inflation (PPI) for all manufactured products rose 2.2 percent in the year to November 2012, compared with a rise of 2.6 percent in the year to October The 'narrow' output price measure, which leaves out volatile sectors, rose 1.4 percent in the year to November 2012, the same rate as last month. Minutes from latest Monetary Policy Committee at the Bank of England showed a minor split between the members. David Miles voted to increase the asset purchase programme by a further GBP 25bn as he sees a greater risk to economic recovery than the other members, but the minutes also said that it was too soon to see the full effect from the recent round of asset purchases. The overall picture from the meeting is that the MPC is in a wait and see mode. November retail sales were not a joyful reading as the October reading was revised downwards and the breakdown of the official i figures showed that t volumes grew in only one of the major sub-sectors in November. Seems as the shopping spree was cancelled last month, but hopefully it returned in December. The budget deficit widened in November as spending surges and income-tax receipts dropped. Public sector net debt was GBP bn at the end of November 2012, equivalent to 68.5 percent of gross domestic product (GDP). Final reading of GDP for the third quarter was reported at 0.9/0.0 0 percent (q-o-q/y-o-y). q/y o y) The downward revision from earlier reported 1.0/0.1 percent (q-o-q/y-o-y) was mainly due to household final consumption expenditure that increased by 0.4 percent in volume terms, revised down from the previously estimated increase of 0.6 percent. Global Sweden - the Riksbank announced a repo rate cut by 25bps to 1.0 percent, in line with our prediction and the consensus expectation. Furthermore, the Riksbank made another downward revision of its repo rate forecast, the so called "repo rate path". Looking forward, the Riksbank now signals that the repo rate will remain flat at about 1.0 percent for the most of

3 Wrap Up, December Monday Rightmove house prices, Dec -3.3/1.4 (p: -2.6/2.0) Tuesday CPI, Nov 0.2/2.7 (e: 0.2/2.6, p: 0.5/2.7) Core CPI, Nov /2.6 (e: /2.7, p: /2.6) PPI input, Nov 0.1/-0.3 (e: 0.2/0.1, p: 0.1/0.0) PPI output, Nov -0.2/2.2 (e: 0.2/2.5, p: 0.2/2.6) PPI output core, Nov 00/14(e: 0.0/ /1.5, p: 0.1/1.4) RPI, Nov 0.0/3.0 (e: 0.3/3.2, p: 0.6/3.2) RPI ex mortgage interest payments, Nov /2.9 (e: /3.1, p: /3.1) Wednesday Bank of England minutes CBI reported sales, Dec 19 (e: 25, p: 33) Thursday Retail sales ex auto, Nov 0.1/2.0 (e: 0.3/2.2, p: -0.5/1.4) Retail sales, Nov 00/09(e: 0.0/ /1.4, p: -0.7/0.8) 07/08) Friday GfK consumer confidence, Dec -29 (e: -26, p: -22) Public finances, Nov -6.8bn (e: -1.0bn, p: -14.6bn) Public sector net borrowing ex interventions, Nov 17.5bn (e: 15.5bn, p: 8.2bn) Public sector net borrowing, Nov 15.3bn (e: 15.0bn, p: 6.0bn) GDP final, Q3 0.9/0.0 (e: 1.0/-0.1, p: 1.0/-0.1) Total business investment t final, Q3 38/51( 3.8/5.1 (e: 3.7/ p: 3.7/4.5) Current account, Q3-12.8bn (e: -12.8bn, p: -17.4bn) Index of services, Oct 0.1/1.1 (e: 0.0/1.1, p: -0.6/1.2) 3 m-o-m/y-o-y a = Actual e = Estimate p = Prior

4 Next week s agenda, December Monday Hometrack housing survey, Dec (p: - 01/03) 0.1/-0.3) Christmas Eve Tuesday Christmas Day market holiday Wednesday Boxing Day market holiday Thursday BBA Loans for house purchase, Nov (e: 34.5k, p: k) Friday No major events 4 m-o-m/y-o-y a = Actual e = Estimate p = Prior

5 Next week s agenda, December 31 January 4 Monday New Years Eve market holiday Tuesday New Years Day market holiday Wednesday PMI manufacturing, Dec (e: 49.1, p: 49.1) Thursday PMI construction, Dec (e: 49.5, p: 49.3) Net consumer credit, Nov (e: 0.0bn, p: -0.5bn) Net lending secured on dwellings, Nov (e: 0.5bn, p: 0.2bn) Mortgage approvals, Nov (e: 54.0k, p: 53.0k) Money supply M4, Nov (p: 0.2/-3.2) Auction of 1% Treasury Gilt 2017 Friday PMI Services, Dec (e: 50.2, p: 50.2) 5 m-o-m/y-o-y a = Actual e = Estimate p = Prior

6 Financial overview 6

7 Government bond yields 7

8 Financial forecast Policy rates last 3 months 6months 12 months USA Eurozone United Kingdom Ten year governm ent bond yields USA Eurozone United Kingdom FX last 3 months 6 months 12 months EUR/USD EUR/GBP GBP/USD Sources: Handelsbanken Capital Markets and Macrobond 8

9 The economy overview of 2012 First quarter 2012 Consumer prices (headline CPI) increased to 3.6 percent in March this year while the unemployment rate was 8.2 percent of the economically active population in the three months to March. In the April budget, the Chancellor revised the OBR GDP forecast upwards to 0.8 percent for GDP in Q1-0.3/-0.2 percent q-o-q/y-o-y. qy y Second quarter 2012 In April, all three sectors were growing. The manufacturing sector, along with services and construction, reported PMI index above the 50- threshold. Sweden, where Finance Minister Anders Borg has told banks to adopt more rigorous capital rules than those set by the Basel Committee on Banking Supervision, is now home to Europe s safest bank. Credit-default swap traders deem Svenska Handelsbanken AB, based in Stockholm, to be at one point this week as safe as the Netherlands, one of four members of the eurozone rated as AAA. Also this week, it cost less to insure against a default at Handelsbanken than at any other European bank, including HSBC Holdings Plc in London, and Frankfurt-based Deutsche Bank AG, according to data compiled by Bloomberg. GDP in Q2 was -0.4/- 0.5 percent q-o-q/y-o-y. q/y o y 9

10 The economy overview of 2012 At the press Conference regarding the Inflation Report on August 8, Bank of England Governor King said: Unlike the Olympians who have thrilled us over the past fortnight, our economy has not yet reached full fitness. But it is slowly healing. Third quarter The Monetary Policy Committee at the Bank of England agreed that the Funding for Lending Scheme, which h would be launched shortly, was a welcome initiative. However, Sir Mervyn King, the Governor of the Bank of England, said at the press conference after publishing the Inflation Report in August that growth has been revised down for this year and the MPC stresses the fact that the outlook for UK growth remains unusually uncertain. The labour market starts to show some puzzling signs with increasing employment while GDP are shrinking. In August, the UK posted its largest budget deficit on record, increasing pressure on Chancellor of the Exchequer George Osborne, as the recession hits tax revenue and pushes up spending on welfare. GDP in Q3 was 0.9/0.0 percent q-o-q/y-o-y respectively. Fourth quarter 2012 As the Government will stick to the budget plan, the responsibility for reviving the British economy again stands on the central bank. With a record-low interest rate and a surging balance sheet, the Bank of England is doing what it can with its expansionary monetary policy. On the expenditure side, households are still squeezed by fiscal austerity and companies hesitate to invest. On balance, we expect GDP to contract in Q4 (first estimate will be published January 25).

11 Chart of the week consumer survey paints mixed picture 11

12 News and statements during the week Consumer confidence fell in December from an 18-month high as optimism about the outlook for the economy plunged, GfK NOP Ltd. said. A sentiment index fell to minus 29 from minus 22 in November, which was the strongest reading since May 2011, the London-based research group said in an ed report today. Economists had forecast a drop to minus 25, according to the median of 21 estimates in a Bloomberg News survey. Consumers are under pressure from inflation that s outpacing wage growth and Chancellor of the Exchequer George Osborne s fiscal squeeze. Measures of retail sales published this week shows shoppers are holding back on holiday shopping while the recovery struggles to gain traction. Consumer sentiment is still fragile despite the fact that Christmas is less than a week away, said Nick Moon, managing director of social research at GfK. (Bloomberg) Ireland s economy cooled in the third quarter, underscoring the International Monetary Fund s warnings on the effects of austerity. Gross domestic product increased 0.2 percent from the second quarter, when it rose a revised 0.4 percent, the Central Statistics Office said in Dublin on Tuesday. The agency had previously estimated that the economy stagnated in the three months through June. Net government spending dropped 0.3 percent, falling for the 14th quarter in 15. The IMF said this week that the government should defer any additional austerity measures to 2015 if growth disappoints next year. (Bloomberg) Despite gains in education and employment among women in the UK over the past decade, the high costs of childcare continue to be a major constraint to many mothers working full-time. OECD projections show that by 2030, if the share of women working reached the same level as for men, annual growth rates in GDP per capita would rise by 0.5 percentage points in the UK. The boost to economic growth would be even higher if women s working hours increased too. The government should facilitate the increase of working hours among women, and especially mothers, starting with more affordable high- quality childcare services. ( %20UK%20FINAL.pdf) 12

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