January - March 2014: What's been happening?

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The first quarter of the year ends here. Here's quick round up of the economic ups and downs so far this year and a look ahead at what sorts of numbers we are expecting to see in the coming weeks.

Manufacturing

The index of production data for January showed a 0.4% increase in manufacturing output on the month, with growth seen across the majority of sub-sectors. The manufacturing PMI index also posted strong data for January and February.

Industry only surveys covering the quarter as a whole all signalled upwards trends in output and orders, including EEF's Business Trends Survey, which also reported a strong uptick in export demand.

2014Q1 FORECAST: Manufacturing growth of 0.8%

Elsewhere in the economy

PMI indices covering services and construction have also been running at above average levels.

Official data on consumption continues to look pretty promising too as retail sales volumes increased quite strongly in February after edging down in January. Consumer confidence has been picking up and the squeeze on incomes is also starting to let up as inflation eases.

However, will we see more positive contributions from investment and net trade following the boost from both in the final months of 2014. The outlook for investment should be positive, building on the growth posted in 2013 - intentions as measured in surveys have strengthened and lending conditions are somewhat easier for smaller businesses. Prospects for net trade look less certain. A more stable Europe will help exports hold up and surveys have been a bit more upbeat about incoming orders, however this may not be enough to outpace imports.

2014Q1 FORECAST: GDP growth of 0.6%

2014Q1 FORECAST: Business investment growth of 1.6%

Inflation

CPI inflation has fallen in each of the last five consecutive months and in February it stood at a four year low of 1.7%. Lower petrol prices have been a contributing factor in falling inflation, which should also spur a further fall in March. Beyond that the outlook for prices looks fairly benign with a stronger GBP holding down import prices and little sign of upward pressure coming through from commodity prices.

March 2014 FORECAST: CPI inflation to drop to 1.5%

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Chief Economist

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