UK Treasury gives go-ahead to ‘print money’ Posted by Gwen Robinson on Jan 20 05:50.
The UK Treasury on Monday gave the Bank of England the power to print money and buy assets direct from companies and banks. In a sweeping set of banking announcements, the Treasury said the Bank would set up a new facility allowing it to buy up to £50bn of high-quality corporate assets that could also be used to boost money supply, if the monetary policy committee felt it would help to meet the Bank’s inflation target. The MPC, which recently cut rates to a historic low of 1.5%, has been cautious about the policy of “printing money”, which evokes hyperinflation in Weimar Germany and Zimbabwe. At least, says Lex, sterling’s “saving grace is that no other currency, even the euro, is in a much better situation”. More analysis here.
This entry was posted by Gwen Robinson on Tuesday, January 20th, 2009 at 5:50 and is filed under Capital markets.
UK economy shrinks 1.5% in final quarter By Daniel Pimlott, Economics Reporter
Published: January 23 2009 09:41 | Last updated: January 23 2009 11:31
Britain fell deeper into recession during the final three months of last year as the economy contracted by 1.5 per cent, according to new figures released on Friday.
The rapid decline in UK economic growth in the fourth quarter of 2008 was the worst performance since the second quarter of 1980, when the country was in the middle of steep downturn, and confirmed the economy grew at its slowest annual pace for sixteen years
Fourth quarter growth was weaker than the 1.2 per cent decline economists on average had been expecting and follows a 0.6 per cent contraction in the third quarter. For the whole of 2008 growth was just 0.7 per cent.
Simon Ellis, economist at Daiwa Securities, noted that while it has been widely acknowledged that Britain has been in a recession for months, the latest data “underline just how swift and sharp the economic deterioration has been.” He added that raidly falling demand signals a further drop in inflation below the Bank of England’s 2 per cent rate, hastening a move towards interest rates of zero per cent.
The confirmation of Britain’s rapidly worsening recession comes after an awful week for the UK economy which has seen unemployment rise to nearly 2m and expectations for manufacturing orders sink to a 50-year low.
Sterling also fell to the lowest level against the dollar for more than two decades this week after a fresh package of measures unveiled by the British government to bailout Britain’s banks increased fears about the country’s debt levels. It was also the week that saw the Royal Bank of Scotland, which also owns the Natwest bank, say it would make the biggest loss ever for a UK company.
The weaker than expected GDP figure sent sterling to fresh lows against the currencies of its major trading partners.
Against the dollar, the pound fell 2.6 per cent to $1.3504, taking the falls for the week versus the US currency to more than 9 per cent. Sterling also fell to a fresh low against the euro of £0.9467 and dropped 3.4 per cent to a fresh record low against the yen.
Equities were also weaker, with the FTSE 100 faliing below 4,000 for the first time in more than a month.
The data, which was the ONS’s preliminary estimate of GDP and provides detail of the level of output in the economy, showed a sharp contraction across the board - in service sector activity, industrial production and construction output.
Neville Hill, economist at Credit Suisse noted that the collapse in output, while broad-based, was most acute in manufacturing, where output fell 4.6 per cent. “That fits the pattern of past recessions, “ he said.
The CBI, the employers’ body which forecast manufacturing would show a contraction of 4.3 per cent for the final quarter on Thursday, warned that the sharp fall in output is the deepest since the early 1980’s.
“The intensity and speed of falling demand combined with the global credit crunch mean this recession is going to be more painful than the early nineties, and sadly one consequence of this will be much higher unemployment,” said John Cridland, deputy director general.
The swift decline in the economy at the end last year followed the escalation of the credit crisis and freeze in global credit markets that was triggered by the collapse of Lehman Brothers, the investment bank, and AIG, the US insurer, in the autumn.
Economists on average expect the economy to contract by 2.4 per cent this year – which would be its worst performance since the Second World War. They also believe output is unlikely to climb back to last year’s levels until late 2011 or 2012.
BCC Director General David Frost talks about the change in business sentiment The UK is facing a serious risk of recession within months, the findings of a survey of almost 5,000 small, medium and large businesses suggest.
The British Chambers of Commerce's (BCC) quarterly report found the credit crunch and rising costs had dented the most important sectors of the economy.
It came as the FTSE 100 stock index briefly dipped into a "bear market".
Prime Minister Gordon Brown said he was the right man to steer the UK economy through "difficult times".
Global stock indexes have also fallen amid concerns about the global economy.
WHAT IS A RECESSION? There are a number of definitions of a recession.
The most commonly used one is when there are two quarters in a row of economic contraction, or negative growth.
But it is quite possible to have two quarters of negative growth and another couple of quarters of decent growth - so the economy actually grows year on year, despite going through a technical recession.
Q&A: What is a recession? PM 'right man' to steer economy FTSE 100 heading to bear market
The gloom surrounding the UK economy has been amplified by a string of further developments including:
Housebuilder Persimmon revealing it had cut 2,000 jobs amid woes in the UK housing market. The building firm said that completions of house sales in the first six months of the year were down 30%, during what it described as the "most challenging period in our recent history". The Council of Mortgage Lenders saying that a recovery in the mortgage squeeze was still "some way away" - revealing that the number of loans for home purchases remained low in May at 52,700. Shares in troubled lender Bradford & Bingley falling another 16% on Tuesday after Monday's 18% drop as concerns lingered over its fundraising plans. Grim outlook
Firms in the manufacturing and services sector said domestic sales and orders had slowed over the past three months, said the BCC, which added that firms were also experiencing serious cash-flow problems.
Its economic adviser, David Kern, said the survey showed a "menacing deterioration" in UK prospects.
"We are now facing serious risks of recession," he said.
"The outlook is grim and we believe that the correction period is likely to be longer and nastier than expected."
There has been disappointing news on house building and mortgages
There are a number of definitions of a recession, but the most commonly used one is when there are two quarters in a row of economic contraction, or negative growth.
Services firms, which include restaurants, gyms and tour operators, have been particularly hard hit, the BCC reported.
Sales and orders, job expectations and confidence in this sector had hit their lowest levels since the recession of the early 1990s.
The BCC's director general David Frost said the report was deeply worrying.
"I am sending Alistair Darling and Gordon Brown a strong message from the businesses I meet every day up and down the country," he said.
"To put more pressure on business would not only restrict business growth and hit the consumer hard, it would crush further what our economy is based on - confidence."
Mortgage drought
The report is likely to add to the wave of pessimism sweeping across the business world, from retailers to house builders.
Last week, the housing market suffered another blow when the Bank of England said mortgage approvals had plunged by 28% in May and were 64% lower than a year earlier.
HAVE YOUR SAY The construction trade has had it coming for a while Nick Smith, Huddersfield Send us your commentsHouse builders are cutting jobs and offices as the property slump continues. Before the news of the job cuts at Persimmon, rival builders Taylor Wimpey and Barratt Developments had announced 2,000 redundancies in the past week.
The mortgage drought has meant many people have been unable to secure the finance they need for a new home, while falling property prices have also put people off buying.
There was more bad news for the economy on Monday, when official figures showed that industrial output was falling at its fastest rate for more than a year.
Meanwhile, Marks and Spencer sent shivers across the retail sector last week when it reported a shock downturn in sales.
Some economists believe the chances of a recession in the UK are now 50:50.
They had hoped the slowdown in the economy would eventually reduce inflation, without turning into full-blown recession.
UK Treasury gives go-ahead to ‘print money’
ReplyDeletePosted by Gwen Robinson on Jan 20 05:50.
The UK Treasury on Monday gave the Bank of England the power to print money and buy assets direct from companies and banks. In a sweeping set of banking announcements, the Treasury said the Bank would set up a new facility allowing it to buy up to £50bn of high-quality corporate assets that could also be used to boost money supply, if the monetary policy committee felt it would help to meet the Bank’s inflation target. The MPC, which recently cut rates to a historic low of 1.5%, has been cautious about the policy of “printing money”, which evokes hyperinflation in Weimar Germany and Zimbabwe. At least, says Lex, sterling’s “saving grace is that no other currency, even the euro, is in a much better situation”. More analysis here.
This entry was posted by Gwen Robinson on Tuesday, January 20th, 2009 at 5:50 and is filed under Capital markets.
UK economy shrinks 1.5% in final quarter
ReplyDeleteBy Daniel Pimlott, Economics Reporter
Published: January 23 2009 09:41 | Last updated: January 23 2009 11:31
Britain fell deeper into recession during the final three months of last year as the economy contracted by 1.5 per cent, according to new figures released on Friday.
The rapid decline in UK economic growth in the fourth quarter of 2008 was the worst performance since the second quarter of 1980, when the country was in the middle of steep downturn, and confirmed the economy grew at its slowest annual pace for sixteen years
Fourth quarter growth was weaker than the 1.2 per cent decline economists on average had been expecting and follows a 0.6 per cent contraction in the third quarter. For the whole of 2008 growth was just 0.7 per cent.
Simon Ellis, economist at Daiwa Securities, noted that while it has been widely acknowledged that Britain has been in a recession for months, the latest data “underline just how swift and sharp the economic deterioration has been.” He added that raidly falling demand signals a further drop in inflation below the Bank of England’s 2 per cent rate, hastening a move towards interest rates of zero per cent.
The confirmation of Britain’s rapidly worsening recession comes after an awful week for the UK economy which has seen unemployment rise to nearly 2m and expectations for manufacturing orders sink to a 50-year low.
Sterling also fell to the lowest level against the dollar for more than two decades this week after a fresh package of measures unveiled by the British government to bailout Britain’s banks increased fears about the country’s debt levels. It was also the week that saw the Royal Bank of Scotland, which also owns the Natwest bank, say it would make the biggest loss ever for a UK company.
The weaker than expected GDP figure sent sterling to fresh lows against the currencies of its major trading partners.
Against the dollar, the pound fell 2.6 per cent to $1.3504, taking the falls for the week versus the US currency to more than 9 per cent. Sterling also fell to a fresh low against the euro of £0.9467 and dropped 3.4 per cent to a fresh record low against the yen.
Equities were also weaker, with the FTSE 100 faliing below 4,000 for the first time in more than a month.
The data, which was the ONS’s preliminary estimate of GDP and provides detail of the level of output in the economy, showed a sharp contraction across the board - in service sector activity, industrial production and construction output.
Neville Hill, economist at Credit Suisse noted that the collapse in output, while broad-based, was most acute in manufacturing, where output fell 4.6 per cent. “That fits the pattern of past recessions, “ he said.
The CBI, the employers’ body which forecast manufacturing would show a contraction of 4.3 per cent for the final quarter on Thursday, warned that the sharp fall in output is the deepest since the early 1980’s.
“The intensity and speed of falling demand combined with the global credit crunch mean this recession is going to be more painful than the early nineties, and sadly one consequence of this will be much higher unemployment,” said John Cridland, deputy director general.
The swift decline in the economy at the end last year followed the escalation of the credit crisis and freeze in global credit markets that was triggered by the collapse of Lehman Brothers, the investment bank, and AIG, the US insurer, in the autumn.
Economists on average expect the economy to contract by 2.4 per cent this year – which would be its worst performance since the Second World War. They also believe output is unlikely to climb back to last year’s levels until late 2011 or 2012.
Copyright The Financial Times Limited 2009
Recession 'looming' for UK firms
ReplyDeleteBCC Director General David Frost talks about the change in business sentiment
The UK is facing a serious risk of recession within months, the findings of a survey of almost 5,000 small, medium and large businesses suggest.
The British Chambers of Commerce's (BCC) quarterly report found the credit crunch and rising costs had dented the most important sectors of the economy.
It came as the FTSE 100 stock index briefly dipped into a "bear market".
Prime Minister Gordon Brown said he was the right man to steer the UK economy through "difficult times".
Global stock indexes have also fallen amid concerns about the global economy.
WHAT IS A RECESSION?
There are a number of definitions of a recession.
The most commonly used one is when there are two quarters in a row of economic contraction, or negative growth.
But it is quite possible to have two quarters of negative growth and another couple of quarters of decent growth - so the economy actually grows year on year, despite going through a technical recession.
Q&A: What is a recession?
PM 'right man' to steer economy
FTSE 100 heading to bear market
The gloom surrounding the UK economy has been amplified by a string of further developments including:
Housebuilder Persimmon revealing it had cut 2,000 jobs amid woes in the UK housing market. The building firm said that completions of house sales in the first six months of the year were down 30%, during what it described as the "most challenging period in our recent history".
The Council of Mortgage Lenders saying that a recovery in the mortgage squeeze was still "some way away" - revealing that the number of loans for home purchases remained low in May at 52,700.
Shares in troubled lender Bradford & Bingley falling another 16% on Tuesday after Monday's 18% drop as concerns lingered over its fundraising plans.
Grim outlook
Firms in the manufacturing and services sector said domestic sales and orders had slowed over the past three months, said the BCC, which added that firms were also experiencing serious cash-flow problems.
Its economic adviser, David Kern, said the survey showed a "menacing deterioration" in UK prospects.
"We are now facing serious risks of recession," he said.
"The outlook is grim and we believe that the correction period is likely to be longer and nastier than expected."
There has been disappointing news on house building and mortgages
There are a number of definitions of a recession, but the most commonly used one is when there are two quarters in a row of economic contraction, or negative growth.
Services firms, which include restaurants, gyms and tour operators, have been particularly hard hit, the BCC reported.
Sales and orders, job expectations and confidence in this sector had hit their lowest levels since the recession of the early 1990s.
The BCC's director general David Frost said the report was deeply worrying.
"I am sending Alistair Darling and Gordon Brown a strong message from the businesses I meet every day up and down the country," he said.
"To put more pressure on business would not only restrict business growth and hit the consumer hard, it would crush further what our economy is based on - confidence."
Mortgage drought
The report is likely to add to the wave of pessimism sweeping across the business world, from retailers to house builders.
Last week, the housing market suffered another blow when the Bank of England said mortgage approvals had plunged by 28% in May and were 64% lower than a year earlier.
HAVE YOUR SAY The construction trade has had it coming for a while
Nick Smith, Huddersfield
Send us your commentsHouse builders are cutting jobs and offices as the property slump continues. Before the news of the job cuts at Persimmon, rival builders Taylor Wimpey and Barratt Developments had announced 2,000 redundancies in the past week.
The mortgage drought has meant many people have been unable to secure the finance they need for a new home, while falling property prices have also put people off buying.
There was more bad news for the economy on Monday, when official figures showed that industrial output was falling at its fastest rate for more than a year.
Meanwhile, Marks and Spencer sent shivers across the retail sector last week when it reported a shock downturn in sales.
Some economists believe the chances of a recession in the UK are now 50:50.
They had hoped the slowdown in the economy would eventually reduce inflation, without turning into full-blown recession.