Transcript Inflation Report February 2005

Inflation Report
February 2005
Demand
Chart 2.1
Consumer spending(a)
(a) Chained volume measure.
Chart 2.2
Retail sales volumes in 2004
Chart 2.3
Sectoral contributions to quarterly
whole-economy investment growth(a)
(a) Chained volume measures.
Chart 2.4
Business investment(a)
(a) Chained volume measure.
Chart 2.5
Euro-area GDP and surveys of purchasing managers
Sources: Eurostat, Reuters and Thomson Financial Datastream.
(a) Weighted average of the PMI monthly indices for manufacturing and services, using the relative magnitude of value added in industry and services
in 2003. A level below 50 indicates a decline in activity; above 50, an increase.
Chart 2.6
Contributions to annual GDP growth in
the United States(a)
Source: US Bureau of Economic Analysis.
(a) Chained volume measures.
Chart 2.7
The US net national saving rate
Source: US Bureau of Economic Analysis.
Chart 2.8
Indicators of Japanese recovery
Source: Thomson Financial Datastream.
(a) Expected conditions over the next three months, from the Tankan survey of large enterprises. There is a discontinuity in the data between 2003 Q4 and
2004 Q1 due to a change in methodology. The results for 2003 Q4 are shown, therefore, on both bases.
Chart 2.9
UK exports, imports and GDP(a)
(a) Chained volume measures.
Chart 2.10
Domestic demand and the terms of trade
(a) Export prices divided by import prices.
(b) Ratio of domestic demand to GDP. Chained volume measures.
Tables
Table 2.A
Expenditure components of demand(a)
Percentage changes on a quarter earlier
Household consumption
Government consumption
Investment
of which, business
Final domestic demand
Change in inventories(b)(c)
Alignment adjustment(c)
Domestic demand
Exports
Imports
Net trade(c)
GDP at market prices
Average
1998–2003
2004
Q1
Q2
Q3
0.9
0.8
0.9
0.9
0.8
0.0
0.0
0.8
0.8
1.4
-0.2
0.7
1.2
0.8
2.8
1.5
1.4
-0.1
-0.1
1.2
-1.7
0.1
-0.5
0.7
0.7
0.5
1.1
1.3
0.7
-0.1
0.2
0.7
1.9
1.3
0.1
0.9
0.6
1.4
0.6
1.0
0.7
0.1
-0.2
0.6
0.7
1.3
-0.2
0.5
(a) Chained volume measures.
(b) Excludes the alignment adjustment.
(c) Percentage point contributions to quarterly growth of GDP.
Table 2.B
Consumption indicators
Indicators(b)
Retail sales volumes(c)
BRC retail sales values(d)
CBI retailers’ reported sales(e)
Private vehicle
registrations(c)(f)
GfK consumer confidence(g)
Determinants
Real disposable income(c)
Equity prices(h)
House price inflation(b)(i)
2003
Average
2004
Q1
Q4
2005
Jan.(a)
Q2
0.9
4.7
14.4
1.5
5.5
27.0
1.9
5.5
41.3
1.0
4.0
5.7
0.3
2.6
21.0
n.a.
2.8
16.3
0.3
-4.5
1.4
-1.7
-8.8
-2.8
-1.7
-4.9
1.2
-4.5
-0.3
-2.1
0.8
1980
4.0
0.4
2219
5.4
1.4
2231
5.3
0.9
2206
2.9
n.a.
2346
0.6
n.a.
2384
0.8
Q3
Sources: Bank of England, Bloomberg, BRC, CBI, GfK, Halifax, Nationwide, ONS and SMMT.
(a) January figure refers to three-month average/three-month change on previous three months.
(b) Quarterly data are averages of monthly observations.
(c) Percentage change compared with previous quarter/three months.
(d) Percentage change in retail sales values compared with a year earlier. This is the ‘total’ measure.
(e) Balance of respondents in the CBI Distributive Trades Survey reporting retail sales higher than a year earlier.
(f) Data have been seasonally adjusted by the Bank of England.
(g) Aggregate GfK measure.
(h) Average level of the FTSE All-Share index.
(i) Calculated from the average of Halifax and Nationwide quarterly indices, adjusted by Bank staff for a change in the
method of calculation of the Halifax index.
Table 2.C
Corporate financial indicators
1987
Capital gearing(a)
Corporate profits(b)
Income gearing(c)
10.8
16.6
14.9
1994
20.8
17.3
15.8
2003
37.5
15.3
18.2
2004
H1
Q3
32.0
15.7
18.4
32.1
15.6
18.8
(a) Private non-financial corporations’ (PNFCs’) net debt as a percentage
of the market valuation of the PNFC sector.
(b) Non-oil PNFCs’ gross operating surplus (excluding the alignment
adjustment) as a percentage of GDP.
(c) PNFCs’ interest payments as a percentage of their gross operating
surplus (excluding the alignment adjustment).
Table 2.D
Indicators of future investment
2003
CBI investment intentions(a)
BCC investment intentions(a)
CBI uncertainty about demand(b)
-14
10
54
2004
H1
Q3
Q4
-1
18
46
-17
17
43
-19
15
49
Sources: BCC and CBI.
(a) Net percentage balance of businesses expecting to increase investment.
The CBI balance refers to manufacturing sector firms. The BCC balance
refers to the average of manufacturing and service sector firms’ investment
intention balances, weighted by the respective shares in aggregate
investment in 2001.
(b) Percentage of manufacturing sector businesses reporting demand
uncertainty as a factor restraining investment.
Table 2.E
Economic conditions in the euro area
GDP growth(b)
Profitability(c)
Long-term real
interest rates(d)
Equity prices(e)
Survey data
PMI(f)
Industrial confidence(g)
Consumer confidence(g)
Employment expectations(g)
2002
Q3
Q4
2004
Q3
Q4
2005
Jan.(a)
0.3
38.3
0.0
38.3
0.3
39.2
n.a.
n.a.
n.a.
n.a.
n.a.
229
3.4
212
n.a.
244
2.8
259
n.a.
265
50.7
-4.1
1.3
-1.1
50.1
-2.5
-2.7
-2.1
54.2
3.5
-2.4
0.9
52.6
3.9
-1.7
0.9
52.5
3.2
-1.7
0.9
Sources: Eurostat, Reuters and Thomson Financial Datastream.
(a) Data refer to three months to January.
(b) Percentage change on previous quarter.
(c) Gross operating surplus and mixed income as a percentage of GDP.
(d) Long rates as defined in Chart 1.3. There are no Q3 observations as these data rely on long-term Consensus
inflation expectations, which are only available twice a year. The Q4 observations use data from the October
survey.
(e) Average level of the Euro Stoxx index.
(f) See footnote (a) of Chart 2.5.
(g) European Commission survey. Reported numbers indicate the balance relative to average since 1985.
Table 2.F
Indicators of consumption and investment in the United
States
2003
Average
2004
Q1
Q2
Q3
Q4
Consumption indicators
Employment(a)
US household net worth( b)
8
5.16
177
5.39
231
5.39
134
5.41
182
n.a.
Investment indicators
Non-defence capital
goods orders ($ billions)
Corporate profits(c)
Lending to corporates(d)
172
7.1
-2.0
184
7.9
-0.7
191
7.7
-1.1
202
7.3
1.5
204
n.a.
1.4
Sources: US Bureau of Economic Analysis and Thomson Financial Datastream.
(a)
(b)
(c)
(d)
Average monthly increase in non-farm payrolls (000s).
The level of US household net worth relative to personal disposable income.
The level of post-tax corporate profits relative to GDP.
Lending to industrial and commercial companies. Percentage change on previous quarter.
Demand
Why has German
domestic demand
growth been so weak?
Chart A
Contributions to average quarterly GDP growth(a)
in Germany and the rest of the euro area
Source: Eurostat.
(a) The dots represent average quarterly GDP growth.
Chart B
Competitiveness — euro-area real effective
exchange rates based on relative unit labour costs
Source: Thomson Financial Datastream.
Chart C
Corporate sector financial balance(a)
Sources: Eurostat and Deutsche Bundesbank.
(a) Non-financial corporate sector. 2003 data for Italy are not available.
Table 1
Labour market indicators in Germany and the rest of the
euro area
Per cent
1995
1998
2001
2004
Annual labour force growth
Germany
Rest of the euro area
-0.8
0.2
1.0
1.5
-1.0
2.8
0.1
0.8
Unemployment rate
Germany
Rest of the euro area
8.0
11.7
9.1
10.7
7.9
8.0
9.8
8.5
Sources: Bank of England and Thomson Financial Datastream.