3 things you may have missed this week.....

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With the Budget being the focus for many this week, some other bits of news may have escaped the radar. Here's a quick rundown on three things you may have missed.

Labour market statistics

Unemployment down, earnings up

  • The labour market improved again, with employment rising to 30.19mn in the three months to January. However, this was due to more self-employed people; the number of employees fell over the period.
  • Unemployment fell by 63,000 over the three-month period, and the ILO unemployment rate remains at 7.2%.
  • Average earnings growth across the whole economy increased slightly to 1.4% in the three months to January, from 1.2% in the three months to December. In manufacturing, this figure was markedly stronger, with average weekly earnings growth of 3.2%.

MPC Minutes

With unemployment still above 7% and no breach of inflation knockouts the decision to keep rates and asset purchases on hold was unanimous

  • International outlook: A mixed picture with modest recovery in the eurozone, weather-related weaker US data and more stable financial conditions in emerging markets. Political tensions in Ukraine were of concern; even though UK linkages are limited effects could come from a general rise in risk premia and increased commodity prices.
  • UK trends: Business surveys point to robust activity and data revisions to business investment had eased concerns that growth was coming solely from households and house building. The refocusing of Funding for Lending towards businesses was expected to further support capital spending over the next year. The Bank expects UK GDP to increase by 0.9% in 2014q1.
  • Prices: Inflation fell to 1.9% in January. The MPC expects domestic inflation pressure to pick up a bit as spare capacity lessens and wage growth picks up. This should be offset by waning external price pressures keeping CPI inflation close to target. There are numerous risks to this outlook, including sterling and tensions in Ukraine.
  • Productivity: Latest ONS data point to a gradual pick up in productivity since its 2012 trough. But question remain about whether this will be sustained - employment growth had slowed and a growth in self-employment has been contributing to the improving labour market conditions which could imply that some individuals are unemployed. On the other side, young people are disproportionately represented among the unemployed, and were they to gain work would add less to productivity than those currently employed.
  • The decision: Unemployment remains above 7% and the Committee judged that neither price stability knockouts had been breached. The Committee's August 2013 policy guidance remains in place and no member voted to change Bank Rate or the stock of asset purchases.

Public Finances

Borrowing £4.4bn lower than a year ago and on track for OBR 2013/14 forecast of £107.8bn

  • The UK government borrowed a total of £99.3bn over the first eleven months of the 2013/14 financial year (which runs from April 2013-March 2014). This was £4.4bn lower than the same period a year earlier.
  • However, for February 2014 alone the borrowing data were slightly weaker than a year earlier, as they had also been in January. This was despite a 54% year-on-year rise in stamp duties in February, reflecting the recent surge in activity and prices in parts of the housing market.
  • The fiscal deficit remains broadly on track to meet the OBR's latest target for the full 2013/14 financial year of £107.8bn, equivalent to 6.6% of GDP.
  • As the chancellor, George Osborne, was keen to stress in this week's budget, the headline level of borrowing has fallen steadily from a peak of £157bn (11% of GDP) in 2009/10.
  • However, the UK public finances remain very weak. Among advanced economies, only Japan is forecast to run a larger fiscal deficit (as a share of GDP) than the UK this year.
  • As a result, the level of government debt is continuing to rise steadily. Public-sector net debt totalled £1.25trn at end-February 2014, equivalent to 74.7% of GDP. The OBR's latest forecasts have public debt peaking (as a share of GDP) at 78.7% in the 2015/16 financial year. This compares with a pre-crisis debt stock of 36% in 2006/07.

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Chief Economist

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