Is inflation a threat to the UK recovery?
This week sees a number of vital economic statistics in the UK with concerns that the rate of inflation is set to spike upwards in the early part of 2010. Recent figures have shown an increase in the cost of raw materials, much of which came from the upward movement in the price of oil, which will have an impact upon inflation. So what else do we need to monitor in the short term?
There is also concern that the government's refusal to maintain VAT at 15%, and instead return it to 17.5%, will also place further upward pressure on the cost of living in the UK. In what is becoming a more difficult scenario by the day, the Bank of England is also under pressure because of the strategy regarding UK base rates which have remained at 0.5% for some time. If inflation does begin to take off, and the Bank of England does not respond quickly enough, we could move towards a situation where the rate of inflation spirals out of control and we need to see a significant increase in base rates in a very short space of time.
The ability to increase base rates and make borrowing more expensive is a very basic tool in the economic UK government's toolbox but one which has proven very effective over the years.
UK Gilt market continues to rise
As we covered last week, the UK gilt market continues to rise on expectations that the Bank of England will soon pump up to £150 billion into the market by buying up government securities and other financial instruments. The acquisition of these investments, via quantitative easing, would increase liquidity in the market place for both the government and financial business in the UK.
Child Trust Fund holders to be able to switch to Junior ISA
23/12/2013 The government has announced plans to allow savings invested into a Child Trust Fund to be transferred to the newer child savings account, the Junior ISA following a public consultation. The move could potentially benefit over 6 million children with savings deposited in a Child Trust Fund. The government led Junior ISA initiative was introduced in 2010, following the closure of t...Read More
Job fears depressing consumer confidence
UK workers' confidence about the security of their jobs is at its lowest for at least 32 months, according to the Lloyds TSB consumer barometer.Just 18 per cent of the 2,000 consumers surveyed said they were more confident about job security today than they were 12 months ago Ã¢â‚¬" the lowest rating since Lloyds TSB began its barometer in November 2004.Although consumers were more upbeat on...Read More
Marks & Spencer pours cold water on UK recovery
Despite reporting sales figures which are the best from the company for two years, Stuart Rose, the executive chairman of Marks & Spencer, believes that the UK recovery is still very fragile and 2010 is unlikely to be any better than 2009. This is something of a damning indictment of the UK retail sector after many investors and many companies appeared to have high hopes of recovery in the short t...Read More
National Institute of Social and Economic Research issues UK report
The National Institution of Social and Economic Research (NISER) has stepped forward with yet another downbeat statement on the UK economy. They believe that the UK economy will fall by 1.5% in 2009 and unemployment could hit a high of 2.5 million by 2010 although they forecast that inflation will fall within the government's 2% target in the medium term.
It is also forecast that th...