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Economic Outlook
Briefing for CIC
Peter Andrews Agency for Greater London
Bank of England
November 2014
Greater London Agency
Overview
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Aug GDP projection, mkt interest rate expectations and £375 bn purchased assets
Nov 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.
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Chart 2 CPI inflation projection based on market interest rate expectations and £375 billion purchased assets
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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.
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Demand
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Recovery in expenditure more weighted towards investment
Greater London Agency. Sources: ONS and Bank calculations
Household saving ratio(a)
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Business investment growth driven by the service sector
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PNFC lending outside real estate sector picks up
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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.
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UK current account deficit historically large
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Housing
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Loan to income multiples had risenNew mortgages for house purchase at LTI multiples >= 4.5
Sources: FCA Product Sales Data and Bank calculations.
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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
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Approvals for home movers weakening
Sources: Bank of England, Council of Mortgage Lenders (CML) and Bank calculations.
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New building is driving housing investment
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Output and supply
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Output growth by sector
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Agents’ scores for output growth
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Unemployment rate projected to fall further
Sources: Labour Force Survey and Bank calculations.
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Employment growth among the lower skilled
Sources: Labour Force Survey and Bank calculations.
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Some slack remains in the labour market
Sources: ONS (including the Labour Force Survey) and Bank calculations.
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Productivity growth(a)
Sources: ONS and Bank calculations.
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Costs and prices
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CPI inflation projected to fall in Q4
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Import price inflation(a)
Sources: ONS and Bank calculations.
Greater London Agency
Unit labour costs growth has stopped
Sources: ONS and Bank calculations.
Economic Outlook
Briefing for CIC
Peter Andrews Agency for Greater London
Bank of England
November 2014
