Economy snippets

vivatifosi

Not many postings on here currently, so thought I'd do a quick update of some of the breaking economic stories of the day. Apologies if there have already been posts done on these.

1. RETAIL FIGS

UK retail not doing as well as hoped in run up to Christmas. The Office for National Statistics (ONS) said that retail sales volumes fell by 0.3 per cent month-on-month in November, thwarting forecasts of a 0.4 per cent rise.
Year-on-year sales were up 3.1 per cent in November, a slow-down from October’s 3.7 per cent rise.

http://business.timesonline.co.uk/tol/business/economics/article6960132.ece

2. GILTS PURCHASES MAY NEED TO RISE SEVEN-FOLD - OUCH!

Stephen Lewis, chief economist at Monument Securities, notes: "Unless the Bank of England continues its gilt purchases on a massive scale, net private-sector purchases of gilts could have to rise roughly sevenfold compared with this year. It beggars belief that this change in conditions would not have an adverse effect on gilt prices. If we add to this the market's suspicion that Mr Darling has a strong political motive for resisting fiscal retrenchment, gilts seem set to underperform other government bonds in the months ahead."
This would spell big trouble for the authorities. The deterioration in Britain's public finances means that even once the toughest squeeze on public spending since the late 1970s starts in 2011, the government is still reliant on rapid growth to halve the deficit within four years. Without the growth, the deficit will not come down nearly so quickly, adding to pressure for even bigger cuts in spending and further increases in taxes.

Extract from longer and broader economic article at:
http://www.guardian.co.uk/business/2009/dec/14/darling-optimism-misplaced

3. OIL

OPEC due to keep oil output steady when it meets in Angola. Oil futures have dropped from a high of $82 a barrel in October to $70. This is still more than double the low of $32 reached last December

http://uk.reuters.com/article/idUKLDE5BC05U20091217

4. WALES

Welsh economy out of step with rest of the UK according to new marketing trends survey from the CIM. Only 33% of Welsh marketers think that the economy will improve over next 12 months, compared with 51% UK average:

http://www.walesonline.co.uk/business-in-wales/business-news/2009/12/17/pessimistic-view-of-economy-puts-wales-out-of-step-with-rest-of-uk-91466-25410487/

5. UKRAINE

Ukraine to hold talks with IMF over securing vital loan. AFP reports that the Ukraine is the hardest hit of any European economy due to its dependence on heavy industry. Let's hope they pay their gas bills. Brrrr (shivers)

http://www.google.com/hostednews/afp/article/ALeqM5hA9Mt2-fE9iIJKnUhoX-4doVCBtw

lostinrates

Viva, many thanks. Not getting time to read papers and stuff now, and so much less news gets posted here to do the filtering for interest.

I wonder why the Welsh are more pessimistic than the rest of the country?

carolt

lostinrates wrote: »

Viva, many thanks. Not getting time to read papers and stuff now, and so much less news gets posted here to do the filtering for interest.

I wonder why the Welsh are more pessimistic than the rest of the country?

Maybe heavyish reliance on public sector?

carolt

2. GILTS PURCHASES MAY NEED TO RISE SEVEN-FOLD - OUCH!

Stephen Lewis, chief economist at Monument Securities, notes: "Unless the Bank of England continues its gilt purchases on a massive scale, net private-sector purchases of gilts could have to rise roughly sevenfold compared with this year. It beggars belief that this change in conditions would not have an adverse effect on gilt prices. If we add to this the market's suspicion that Mr Darling has a strong political motive for resisting fiscal retrenchment, gilts seem set to underperform other government bonds in the months ahead."
This would spell big trouble for the authorities. The deterioration in Britain's public finances means that even once the toughest squeeze on public spending since the late 1970s starts in 2011, the government is still reliant on rapid growth to halve the deficit within four years. Without the growth, the deficit will not come down nearly so quickly, adding to pressure for even bigger cuts in spending and further increases in taxes.

Extract from longer and broader economic article at:
http://www.guardian.co.uk/business/2...mism-misplaced

Ouch - this sounds painful.

vivatifosi

carolt wrote: »

Maybe heavyish reliance on public sector?

They are reliant on the public sector, but there are other regions that are more so. IIRC Northern Ireland is the most dependent. Having read the article, I'm not sure I'm any the wiser. I came away wondering if it could even be part of the Welsh psyche, as they are expecting a higher than average increase in sales while being most concerned about the economy. Maybe there's a natural reserve there and prudence that the Government would do well to tap into .

vivatifosi

The gilts issue worries me big time. I sat in a pensions meeting and wrote on the boards at the time that this had been mentioned. Basically they said that it was the biggest expansion in gilts in all the time that there have been gilt markets in the UK.

I don't get the UK government's obsession with getting new entries in the Guinness Book of Records. Its a bit too scary.

Wookster

I find the Guardian's coverage of the public finances slightly disingenuous. Polly Toynbee harps on about how public spending (and taxes) should rise, she simply does not understand the dangerous implications of a gilt strike or of government crowding out private investment.

vivatifosi wrote: »

The gilts issue worries me big time. I sat in a pensions meeting and wrote on the boards at the time that this had been mentioned. Basically they said that it was the biggest expansion in gilts in all the time that there have been gilt markets in the UK.

I don't get the UK government's obsession with getting new entries in the Guinness Book of Records. Its a bit too scary.

I'm sure Labour mean well, they, but just like Polly Toynbee don't have a clue when it comes to matters financial. They play fast and loose with the Nation's finances.

vivatifosi

I don't normally quote from the Guardian as many other papers write subjects up better and often get them on the wires quicker (and no I'm not a rabid right-winger). But I did like their quote from Stephen Lewis. Its like the subject of QE. The average member of the public had no idea what it was a year or so ago. Many won't know what gilts are at the moment, but I bet you, a year from now, they will. This story will play out and take centre stage over the coming months, rather than being the elephant in the room as it is at the moment. Mind you, I think there may be a herd of elephants in the room right now.

nickmason

vivatifosi wrote: »

They are reliant on the public sector, but there are other regions that are more so. IIRC Northern Ireland is the most dependent. Having read the article, I'm not sure I'm any the wiser. I came away wondering if it could even be part of the Welsh psyche, as they are expecting a higher than average increase in sales while being most concerned about the economy. Maybe there's a natural reserve there and prudence that the Government would do well to tap into .

Hello all.

1/4 of all UK unemployment over the last year has been in Wales.
1/2 of all UK unemployment over the last quarter has been in Wales.
The public sector cuts haven't come in yet.

And alongside that, the Assembly is raising business rates - especially for tourism related businesses iirc.

I have a horrible feeling that the Welsh marketers know what they're talking about.

Generali

End-2010/2011 could be quite messy.

The Government has said that borrowing will continue for next year at current rates, that is to say new borrowing of about 13% of GDP or a little shy of £200,000,000,000.

The budget has borrowing come down substantially the following year, 2011-2 which is also when the next '3 Year Plan' (can't remember the official name) comes into effect.

The unions know that in 2010-1 they have a once in every 3 year opportunity to get a good deal for their workers. At the same time, the fiscal constraints are likely to be immense as the Government will be trying to cut the deficit as interest rates across the world are rising (surely most economies will be back on their feet by 2011) and so the interest bill on the existing debt will be rising.

If UK GDP is rising quickly by then, that should go some or even most of the way to bailing the public finances out. I have my doubts as to whether that's likely given that the main drivers of growth over the last few years are looking unlikely to stage a rapid recovery to strength (retail, consumer lending, commercial property and housing).

Wookster

vivatifosi wrote: »

I don't normally quote from the Guardian as many other papers write subjects up better and often get them on the wires quicker (and no I'm not a rabid right-winger). But I did like their quote from Stephen Lewis. Its like the subject of QE. The average member of the public had no idea what it was a year or so ago. Many won't know what gilts are at the moment, but I bet you, a year from now, they will. This story will play out and take centre stage over the coming months, rather than being the elephant in the room as it is at the moment. Mind you, I think there may be a herd of elephants in the room right now.

I really wish I could be optimistic about the short term future but I just can't find much to be positive about (economically that is). Lets hope that a really credible plan is put in place after the election and that this is soon enough to avoid a gilt strike.