Transcript Document
Economic Outlook Briefing for CIC Peter Andrews Agency for Greater London Bank of England November 2014 Overview Greater London Agency Nov GDP projection, mkt interest rate expectations and £375 bn purchased assets Aug GDP projection, mkt interest rate expectations and £375 bn purchased assets Greater London Agency Market expectations for UK, US and euro-area interest rates have fallen since August Sources: BoE, Bloomberg, ECB and Federal Reserve. Greater London Agency Chart 2 CPI inflation projection based on market interest rate expectations and £375 billion purchased assets Greater London Agency Table 5C Key Judgements • Global growth picks up only gradually following recent weakness, particularly in the Euro area. • Domestic demand growth is sustained by further declines in private sector saving and a gradual revival in average real incomes. • A modest recovery in productivity underpins output growth so that the pace at which slack is absorbed slows. • As import costs stop falling, their drag on inflation wanes, and a pickup in unit labour cost growth gradually returns inflation to the 2% target. Greater London Agency Demand Greater London Agency Recovery in expenditure more weighted towards investment Greater London Agency Household saving ratio(a) . Sources: ONS and Bank calculations Greater London Agency Business investment growth driven by the service sector Greater London Agency PNFC lending outside real estate sector picks up Greater London Agency Near-term outlook for external demand revised down Sources: Eurostat, IMF World Economic Outlook Oct 2014, OECD, ONS, Thomson Reuters, Datastream, US Bureau of Economic Analysis and Bank calculations. Greater London Agency UK current account deficit historically large Greater London Agency Housing Greater London Agency Loan to income multiples had risen New mortgages for house purchase at LTI multiples >= 4.5 Sources: FCA Product Sales Data and Bank calculations. Greater London Agency House price inflation moderated a little Sources: Halifax, Land Registry, Nationwide, ONS, Rightmove.co.uk, RICS and BoE calculations. Greater London Agency RICS survey: regional house prices over past 3 months Greater London Agency Approvals for home movers weakening Sources: Bank of England, Council of Mortgage Lenders (CML) and Bank calculations. Greater London Agency New building is driving housing investment Greater London Agency Output and supply Greater London Agency Output growth by sector Greater London Agency Agents’ scores for output growth Greater London Agency Unemployment rate projected to fall further Sources: Labour Force Survey and Bank calculations. Greater London Agency Employment growth among the lower skilled Sources: Labour Force Survey and Bank calculations. Greater London Agency Some slack remains in the labour market Sources: ONS (including the Labour Force Survey) and Bank calculations. Greater London Agency Productivity growth(a) Sources: ONS and Bank calculations. Greater London Agency Costs and prices Greater London Agency CPI inflation projected to fall in Q4 Greater London Agency Import price inflation(a) Sources: ONS and Bank calculations. Greater London Agency Unit labour costs growth has stopped Sources: ONS and Bank calculations. Greater London Agency Economic Outlook Briefing for CIC Peter Andrews Agency for Greater London Bank of England November 2014