Transcript Document

Economic Outlook – January 2012
Glynn Jones, Bank of England
West Midlands Agency
West Midlands Agency
November GDP projections revised downwards(1)
1) based on market interest rate expectations and £275 billion asset purchases
West Midlands Agency
Global Outlook
West Midlands Agency
Survey measures of global output growth
indicate slowing, especially in Eurozone
West Midlands Agency
Selected European ten-year government bond
spreads over German government bond yields
West Midlands Agency
Net Trade as a percentage of GDP shows some
improvement ……
West Midlands Agency
Domestic Outlook
West Midlands Agency
And UK business and (especially) consumer
confidence weakening
West Midlands Agency
Levels of consumption are falling as consumers
see real income squeezed
West Midlands Agency
Investment & employment intentions are weakening
West Midlands Agency
Public sector net borrowing will continue to fall
West Midlands Agency
More generally, contacts report credit conditions
tightening ......
• Availability of funds has
tightened
• Small firms most
affected
• Concern about future
credit availability
• Forbearance remains
high
• Modest pick up in
receiverships
Loans to UK businesses by size
West Midlands Agency
Private sector employment intentions positive, public
sector cuts key driver of weak Q3 figures
• Quite strong evidence to
suggest that cuts to
headcount have been
front loaded
• Frequent references to
cuts to staff being
enacted over the first
two or three years of the
programme
• Incentive for early cuts,
as grant is slightly larger
West Midlands Agency
Inflation Outlook
West Midlands Agency
Consumer price inflation currently high......
CPI
Percentage change on a year earlier
RPIX
RPI
7
6
5
4
3
2
1
0
-1
-2
-3
2007
2008
2009
2010
2011
West Midlands Agency
But expected to fall as VAT falls out of calculation
Direct contribution of energy prices to CPI inflation and estimate
of VAT contribution
West Midlands Agency
November projection of annual CPI inflation
indicates sharp fall(1)
1) based on market interest rate expectations and £275 billion asset purchases
West Midlands Agency
In light of weak outlook MPC launch further round of QE
Stylised transmission mechanism for asset purchases
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Regional Economic Outlook
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As manufacturing output growth continues, albeit
there are now some signs of slowing
West Midlands Agency
However, PMI shows activity in the West Midlands
continues to increase at a solid pace
West Midlands Agency
From 2000-2007 average annual growth in GVA in
the WM has been slowest of any UK region
West Midlands Agency
2.0
0.0
West Midlands Agency
London
4.0
South East
6.0
South West
8.0
East
10.0
East Midlands
12.0
North West
14.0
40.0
West Midlands
No Qualifications
North East
16.0
% of working age population with NVQ Level 4+
qualifications
18.0
Yorkshire &
Humber
West Midlands
North West
Yorkshire &
Humber
North East
East Midlands
London
East
South East
South West
% of working age population with no qualifications
The region’s skills base limits productivity and the
development of knowledge-sectors
NVQ Level 4+ Qualifications
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Summary
West Midlands Agency
www.bankofengland.co.uk
West Midlands Agency