Economic Update 8th February 2012
Positive start for manufacturing
Despite general gloom the manufacturing sector has started 2012 with an unexpected bounce.
The sector grew in January according to the Markit/CIPS manufacturing purchasing managers' index (PMI) with output expanding at the fastest pace since last March.
New orders rose following a period of contraction, while foreign demand also increased at a moderate rate. Staffing levels were broadly unchanged.
Rob Dobson, Senior Economist at Markit said, “Growth is nowhere near the surging highs of 12 months ago, but this is nonetheless a vast improvement on the 0.9% reduction in output seen at the end of last year.
http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9113
Bank business lending to fall
Total UK bank lending is likely to fall by 2.2% this year for the first time since 2009, according to economic forecasters the Ernst & Young Item Club.
Business loans are predicted to drop 5.7%, with the small and medium-sized enterprise sector likely to be worst hit.
The Item Club points out that in failing to increase lines of credit to the SME sector as agreed under Project Merlin in 2011, the major banks (RBS, HSBC, Lloyds, Barclays and Santander) will be breaking a commitment.
Neil Blake, senior economic adviser at the Item Club said, "They [the banks] may be hitting the letter of the Project Merlin targets but certainly not hitting the spirit of it ……………….. From the bank's point of view they're being pushed to cut back, they're being pushed to be less risky, to rebuild their balance sheets and all that means is that they will cherry-pick."
http://www.bbc.co.uk/news/business-16902598
Construction confidence and output up
Business confidence rose in the construction sector in January, at the same time as output levels posted a thirteenth successive month of steady growth.
Commercial construction was the motor of growth, with civil engineering and housing, by contrast, posting negative figures. Employment levels were unchanged.
http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9134
Recession this year says think tank
A think tank has urged the government to slow its austerity cuts programme saying a recession is forecast for the UK in 2012.
With negative growth of 0.2% in the last three months of 2011, the National Institute of Economic and Social Research (NIESR) says that the economy is likely to contract further this year.
A recession is defined as two or more successive quarters of negative growth.
NIESR says that the economy to shrink 0.1% in 2012, and then will grow 2.3% in 2013, if the eurozone situation is sorted out.
Joblessness is predicted to hit to about 9% this year, up from 8.4% at the end of 2011. NIESR estimates that unemployment will fall to 7% in 2014.
http://www.niesr.ac.uk/pdf/020212_170728.pdf
http://www.bbc.co.uk/news/business-16864664