Global & UK Macroeconomic Outlook · Global & UK Macroeconomic Outlook 5th February 2014 Andrew...
Transcript of Global & UK Macroeconomic Outlook · Global & UK Macroeconomic Outlook 5th February 2014 Andrew...
2013 was much better than expected
-4.0
1.8
0.9
0.0
1.0
-6
-5
-4
-3
-2
-1
0
1
2
3
2009 2010 2011 2012 2013
GB13
UK: GDP % year
Source : Oxford Economics
2013 was much better than expected
-4.0
1.8
0.9
0.0
1.0
-5.2
1.71.1
0.3
1.9
-6
-5
-4
-3
-2
-1
0
1
2
3
2009 2010 2011 2012 2013
GB13
GB14
UK: GDP % year
Source : Oxford Economics
PMIs suggest 2013 may have been even better
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
35
40
45
50
55
60
UK: GDP vs composite PMI% quarter
Source : ONS/CIPS/Markit
% balance
GDP growth
(LHS)
Composite PMI
(RHS)
The recovery has been horribly unbalanced
-1.0
-0.5
0.0
0.5
1.0
1.5
Consumer
spending
Investment Govt.
consumption
Inventories Net trade
UK: Contributions to GDP growth, 2013%pts
Source : Oxford Economics
Other
Residential
Business
Where do we go from here?
Limited room for consumers to further reduce the savings
ratio…
More confident consumers have been saving less
0
1
2
3
4
5
6
7
8
9
10
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
UK: Savings ratio% of household disposable income
Source : ONS
-45
-40
-35
-30
-25
-20
-15
-10
-5
0
2007 2008 2009 2010 2011 2012 2013 2014
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
UK: Consumer confidence & unemployment
Confidence, % balance
Source : Gfk NOP / ONS
Consumer confidence
(LHS)
Unemployment
(RHS)
ILO unemployment rate,
% (inverted)
Where do we go from here?
Limited room for consumers to further reduce the savings
ratio…
…but prospects for real wages are much improved
Skills shortages will boost wage pressures…
35
40
45
50
55
60
65
70
75
80
85
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
UK: BCC survey - recruitment difficulties% of firms
Source : BCC
Manufacturing
Services
…allowing spending power to steadily improve
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
2002 2004 2006 2008 2010 2012 2014 2016
% year
CPI inflation
Source: Oxford Economics
Average earningsForecast
UK: Earnings & inflation
Bank Rate to remain at 0.5% until mid-2015
0
1
2
3
4
5
6
2002 2004 2006 2008 2010 2012 2014 2016 2018
UK: Interest rates%
Source : Oxford Economics
Bank Rate
10-year gilt
yield
Forecast
Where do we go from here?
Limited room for consumers to further reduce the savings
ratio…
…but prospects for real wages are much improved
Housing should remain supportive without prices
entering bubble territory (outside of London)
Rising supply should keep a lid on house prices
150
200
250
300
350
400
450
500
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
-20
-10
0
10
20
30
Source: Oxford Economics
000's
House prices
(RHS)
Housing turnover
(LHS)
% change
UK: House prices and transactions
F'cast
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
UK: Construction orders - new housing£bn, 2005 prices
Source : ONS
Where do we go from here?
Limited room for consumers to further reduce the savings
ratio…
…but prospects for real wages are much improved
Housing should remain supportive without prices
entering bubble territory (outside of London)
Increasing signs that firms are planning to ramp up
investment plans
Firms have continued to add to cash piles…
27
28
29
30
31
32
33
34
35
2005 2006 2007 2008 2009 2010 2011 2012 2013
UK: Business investment£bn, 4QMA
Source : ONS
22
23
24
25
26
27
28
29
30
31
2005 2006 2007 2008 2009 2010 2011 2012 2013
UK: PNFC deposits% of GDP, 4QMA
Source : ONS
…but now confidence seems to be improving
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
1996 1998 2000 2002 2004 2006 2008 2010 2012
Source: BCC
% balance
UK: Confidence in profitability
Service sector
Manufacturing sector
-40
-30
-20
-10
0
10
20
30
40
1996 1998 2000 2002 2004 2006 2008 2010 2012
Source: BCC
% balance
UK: Investment intentions
Service sector
Manufacturing sector
Where do we go from here?
Limited room for consumers to further reduce the savings
ratio…
…but prospects for real wages are much improved
Housing should remain supportive without prices
entering bubble territory (outside of London)
Increasing signs that firms are planning to ramp up
investment plans
Improving global outlook will support stronger export
growth
Surveys and official export data have diverged
-50
-40
-30
-20
-10
0
10
20
30
40
1996 1998 2000 2002 2004 2006 2008 2010 2012
Source: BCC
% balance
UK: Export orders
Service sector
Manufacturing sector
-20
-15
-10
-5
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013
UK: Non-oil goods exports%3m-on3m, yr ago
Source : ONS
EU
Non-EU
Stronger growth forecast in most markets…
1.9
-0.4
1.7
7.7
2.2
3.1
0.9
1.8
7.3
2.9
-1
0
1
2
3
4
5
6
7
8
US Eurozone Japan China World
2013
2014
World: GDP forecasts% year
Source : Oxford Economics
…so firm pickup in exports is in prospect
-16
-12
-8
-4
0
4
8
12
16
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
Source: Oxford Economics
Exports
(non-fuel goods)
World trade
Forecast
UK: Exports & world trade% year
Faster and more balanced growth in prospect
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1997-
2007
2012 2013 2014 2015 2016 2017 2018
Consumer spending Investment
Govt. consumption Inventories
Net trade
UK: Contributions to GDP growth%pts
Source : Oxford Economics
UK forecast summary
2012 2013 2014 2015 2016 2017 2018Domestic Demand 1.2 1.8 2.2 2.2 2.3 2.2 2.2
Private Consumption 1.5 2.2 2.2 2.2 2.3 2.5 2.6
Fixed Investment 0.7 -2.2 6.5 6.3 6.5 5.9 4.3
Stockbuilding (% of GDP) 0.3 0.9 0.6 0.5 0.5 0.5 0.5
Government Consumption 1.6 0.4 0.8 -0.3 -0.9 -1.5 -0.7
Exports of Goods and Services 1.1 1.1 3.1 4.0 5.2 5.3 4.6
Imports of Goods and Services 3.1 0.8 1.9 3.1 4.0 4.2 3.7
GDP 0.3 1.9 2.6 2.4 2.6 2.6 2.5
Industrial Production -2.5 0.1 2.8 1.7 1.6 1.5 1.3
CPI 2.8 2.6 1.7 1.8 1.7 1.9 2.0
Current Balance (% of GDP) -3.7 -3.6 -2.9 -2.3 -1.8 -1.5 -1.2
Government Budget (% of GDP) -6.3 -5.5 -5.3 -4.3 -3.2 -2.0 -0.8
Short-Term Interest Rates (%) 0.84 0.50 0.53 0.66 1.57 2.61 3.65
Long-Term Interest Rates (%) 1.91 2.44 3.11 3.30 3.59 4.01 4.48
Exchange Rate (US$ per £) 1.59 1.56 1.57 1.53 1.55 1.53 1.52
Exchange Rate (Euro per £) 1.23 1.18 1.21 1.23 1.27 1.27 1.27
Forecast for UK
(Annual percentage changes unless specified)
Output gap is large and will close very slowly
-6
-5
-4
-3
-2
-1
0
1
2
3
4
1990 1994 1998 2002 2006 2010 2014 2018
Oxford Economics
OBR
UK: Output gap% of potential output
Source : Oxford Economics, OBR
Risks to the outlook
How will companies respond to the improving outlook?
Will house prices spiral out of control?
Will real wages start to pick up as the recovery continues
to gain momentum…
…and what about productivity?
Will the MPC hold its nerve?
Are we underestimating the likely recoveries in advanced
economies?
Will the Eurozone avoid deflation?
Alternative scenarios for the UK economy
-8
-6
-4
-2
0
2
4
6
2002 2004 2006 2008 2010 2012 2014 2016 2018
Baseline
Golden age
Eurozone deflation
UK GDP forecasts for alternative scenarios% year
Source : Oxford Economics
Forecast