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 West Midlands Agency Regional Economic Outlook West Midlands Agency 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