Transcript Abbey Corporate PP Template

Barry Naisbitt
Economic Analysis
Trends in the Economy
30th September 2010, London
United Kingdom
22
Recession has been deep
 Output in the World’s major economies fell sharply in late 2008 and early 2009. The
economies look to have emerged from recession by late 2009.
GDP Growth (% q/q)
3
2
1
0
-1
-2
-3
-4
-5
2005
Source – OECD
2006
2007
Germany
Japan
2008
United Kingdom
2009
United States
2010
33
Output performance has shown a mixed picture
 UK manufacturing output fell by 14.3% from its level in Q2’08 to the low point in Q3‘09.
 In contrast, total service sector output fell by 4.6% over the same period.
Level of output by industries (Index 2006=100)
110
105
100
95
90
85
2006
2007
Wholesale & retail trade
Source – ONS
2008
Manufacturing
2009
2010
Total Services
44
Employment has fallen
 Services employment fell by 2% from its level in Q2’08 to the low point in Q4‘09.
 In contrast, manufacturing employment fell by 10% over the same period.
Level of employment by industries (Index 2006=100)
110
100
90
80
2006
2007
Wholesale & retail trade
Source – ONS
2008
2009
Manufacturing
2010
Total Services
55
Unemployment has risen as a consequence
 The unemployment rate in the US has risen more than rates in the UK or the Euro-zone.
 Unemployment in the UK reached 8.0% in March ‘10, its highest since October ’96.
Unemployment Rate (%)
10
9
8
7
6
5
4
3
2
1
0
2005
Source – ONS, BLS
2006
2007
United Kingdom
2008
United States
2009
Eurozone
2010
66
Government borrowing has risen sharply
 Public sector borrowing and debt have risen sharply but governments have announced plans
to reduce borrowing by reducing spending and increasing taxation.
Fiscal Tightening
Public Sector Net Borrowing (as % GDP)
Public Sector Net Debt (as % GDP)
2015-16
2014-15
2013-14
2012-13
2011-12
2010-11
2009-10
2008-09
2007-08
2006-07
2005-06
2004-05
2003-04
2002-03
2001-02
2000-01
Source – Budget June’10, ONS
2015-16
0
2014-15
-2
2013-14
10
2012-13
0
2011-12
20
2010-11
2
2009-10
30
2008-09
4
2007-08
40
2006-07
6
2005-06
50
2004-05
8
2003-04
60
2002-03
10
2001-02
70
2000-01
12
77
The global economy is now recovering
 World trade has picked up from its sharp fall and low point in Q1’09.
 However, it will take time to regain the previous peak in activity.
World Exports ($Trillion)
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2005
Source – WTO
2006
2007
2008
2009
2010
Relatively high inflation is reducing real earnings growth
 Despite the recession, inflation has been running above its target. As average earnings
growth has moderated, the higher inflation has squeezed real earnings growth.
Average earnings growth and inflation (%)
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2005
2006
2007
2008
Average earnings growth (excl. bonuses), %yy 3mma
Source – ONS
2009
2010
CPI, %
88
99
Consumers and businesses
 Consumer confidence has recovered from its lows but recent readings have shown some
softening. Business investment has steadied after a substantial fall in early 2009.
Consumer Confidence & Retail Sales Volume ( index & 3m/3m annual % change) and
Business Investment Growth (level, £bn)
0
5
40
-5
4
-10
-15
3
35
-20
2
-25
30
-30
1
-35
0
-40
-45
GfK Consumer Confidence (LHS)
-50
Retail Sales Volume, annual 3m/3m% (RHS)
-55
Jan-07
25
Business Investment, £bn
-1
-2
Jul-07
Jan-08
Source – ONS, GfK
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
20
Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10
The economic outlook is far from certain
 UK GDP grew very strongly in Q2 (+1.2% q/q), but this rapid pace will weaken. There is
speculation about a possible ‘double dip’.
Latest economic indicators
Source – Financial Times, 2nd September
10
10
Recovery is expected to continue
 The new Office of Budget Responsibility (OBR) expects the economy to grow by 1.2% in
2010, 2.3% in 2011 and 2.8% in 2012.
Budget GDP Forecast (% Annual change in GDP)
Source–Budget June’10
11
11
United Kingdom