Money Supply

BoE makes rulers redundant

Claire Jones — Wed, 15 May 2013 18:08:24 +0000

One of the few occasions when I’ve used a ruler since leaving school is during the Bank of England’s inflation report press conferences. I’m not alone — for years a ruler has been an essential tool for those trying to fathom what monetary policy makers thought was going to happen to growth and inflation in the months and years ahead.

The BoE’s practice of waiting a week between releasing its quarterly fan charts for growth and inflation and the data underlying them left bank-watchers with little choice but to dig out the ruler to work out where the MPC thought growth would be in, say, 2014. As Chris Giles commented here, there were several problems with this approach.

Now, thanks to the Stockton Review, reporters need no longer remember their rulers (hat tip to George Buckley at Deutsche Bank for the headline of this post).

Inflation report in five bites

Chris Giles — Wed, 15 May 2013 14:11:39 +0000

If you read today’s Bank of England inflation report, you will notice some welcome changes. More will follow on this blog about the improvements in BoE transparency. In the meantime, the five things you need to know about the bank’s economic outlook are:

Five quick takeaways from the eurozone GDP numbers

Michael Steen — Wed, 15 May 2013 11:40:12 +0000

You still need a strong constitution or a taste for gallows humour to read most eurozone economic statistics, as today’s release of the preliminary Q1 gross domestic product ~~growth~~ contraction data shows.

The bloc is now in its longest recession since the birth of the single currency, beating the post-Lehman Brothers slump in duration, though not in the depth of the downturn.

Live coverage of the European Central Bank’s interest rate decision

Richard Martin — Thu, 02 May 2013 10:59:44 +0000

Hello and welcome to the FT's live blog on the European Central Bank's rate decision and press conference. All eyes on Thursday are on the ECB and what it has left in its tool kit as gloomy data throws further doubt on the recession-bound eurozone economy.

Many economists are expecting what would largely be a symbolic cut in interest rates. The governing council's vote is due at 12.45 (BST) and ECB President Mario Draghi will meet the press at half past one.

By Claire Jones and Lindsay Whipp. All times are UK time.

FOMC preview, May 2013

Robin Harding — Tue, 30 Apr 2013 16:29:01 +0000

The current FOMC meeting, which starts today and concludes tomorrow without a Ben Bernanke press conference, is unlikely to produce much news. Steady movement towards a taper of the $85bn, QE3 programme of asset purchases has been checked by a run of bad economic data since March.

I get no sense that much has changed in the thinking of most FOMC officials. There is still a fair bit of confidence that the underlying state of the economy has improved (see, for example, the comments of Boston Fed president Eric Rosengren). The main effect of weak payrolls and the sequester is to increase uncertainty about the trajectory of the economy. That encourages the status quo – and open-ended QE means the default is continued purchases.

Did sequestration cause weak Q1 GDP?

Robin Harding — Fri, 26 Apr 2013 21:44:34 +0000

We leaned heavily on the idea that sequestration is slowing the growth of the US economy in our write-up of Q1 GDP. The immediate reason to do so is the composition of growth.

Federal defence spending knocked 0.65 percentage points off total growth. Without that, the headline figure would have been an annualised 3.2 per cent instead of 2.5 per cent, bang in line with expectations.

How to raise growth 2014-style

Chris Giles — Thu, 25 Apr 2013 17:13:08 +0000

The FT’s US economics editor Robin Harding had an excellent scoop this week on the US plans to change the calculation methodology for the national accounts in a move that will lift US GDP by 3 per cent in July. Even better, he explained that the changes to the way the US statistics authorities plan to count intangible investment and military procurement were not a unilateral act, but part of a United Nations coordinated approach. What effect would this have on Europe, I wondered.

Well, after a root around Eurostat’s website, the UK’s ONS methodology pages and some academic articles, I am really excited. The bottom line for people with better things to do is that Eurostat reckons GDP in most EU countries will also go up by about 2 to 3 per cent. The amount depends on the quantity of R&D expenditure carried out (good for Germany, Sweden and Finland, bad for Greece) and amount of military kit purchased every year (good for France and the UK). With some exceptions, every EU country has to put in place the new European System of Accounts by September 2014. But it gets even more interesting.

A positive surprise on UK growth

Chris Giles — Thu, 25 Apr 2013 09:06:05 +0000

After almost five years of disappointing services output, Britain’s shops, restaurants, car dealerships and airlines have come to the rescue of George Osborne. They have also saved the country from deeply misleading “triple-dip” headlines, although output is still 2.6 per cent below its 2008 peak.

The preliminary estimate of gross domestic product rose 0.3 per cent in the first quarter. As my column today argued, we should not pay much attention to this figure, since the cash estimates of GDP, which come later, are more relevant to the economy’s predicament. But there are some implications of this positive surprise and I list them here in order of importance.

Others will follow Australia’s shift into the renminbi

Claire Jones — Wed, 24 Apr 2013 19:24:24 +0000

This from the FT’s Josh Noble:

The Australian central bank plans to invest about 5 per cent of its foreign reserves in Chinese government bonds, in the latest move to build closer economic ties between the two countries.

The lead set by the Reserve Bank of Australia and a few others is likely to be followed by central banks elsewhere.

Reinhart-Rogoff Initial Response

Robin Harding — Tue, 16 Apr 2013 20:08:20 +0000

Here below is the full statement from Carmen Reinhart & Kenneth Rogoff giving an initial response to criticisms of their work: