A look at the UK's latest data by Mark Carney

Actually the commentary is by one of my favourite bloggers, pulling apart the numbers and Mark Carney's comments. He isn't the best writer, but a) he went to the LSE, and b) he identifies the key problems. His blog is   notayesmanseconomics, and I recommend you take a look at it from time to time:




Posted on October 9, 2015  
  

Today is a day with plenty of UK economic news and it has started positively with the BDO Retail Sales tracker being publicly released.

consumer spending rebounded in September with sales recording a year-on-year uplift of 2.8% – the best figures for the month of September since 2012,

In terms of a break down then we are told that the drivers of this growth were as follows.

Lifestyle saw an impressive rise of +5.4%, largely caused by an uplift in spending of giftware and stationery items

Although one area of this may fade in England but not Scotland, Wales or Northern Ireland.

Some retailers indicated the Rugby World Cup had helped to boost sales.

Some caution is required as the numbers for last month on this series were dire but it does seem to provide an impression of the direction of travel if not the size of the move. So we have an upwards hint for the official retail sales numbers.


Mark Carney
He has been speaking overnight at the International Monetary Fun meeting in Lima. Presumably embarrassed by the continual failure of his Forward Guidance on Bank Rate he decided to indulge in yet more Open Mouth Operations. From Reuters.

“The exact timing of the Fed move is not decisive for the timing of the move by the Bank of England,” Carney said in a seminar at the annual meeting of the International Monetary Fund.

He went so far as to point out this.

Carney made the point that in the five rate cycles since Britain adopted inflation targeting, the Bank of England moved before the Fed in two of them.

That is a bit like when a football commentator tells you about results been clubs from 20 years ago when some of the players had not even been born! Of course Mark Carney has the problem of his promises back in June 2014 which were plainly designed to make investors think an interest-rate rise was on its way. This compares starkly with yesterday’s vote of 8-1 against with him being one of those against. Still he thought he would recycle his lines one more time.

“Anybody who states with certainty the timing, is not right, because there are tactical considerations around the timing.”

Actually the main person who has been trying to hint at the timing has been him. After all the crying wolf efforts he finds that markets listen to him now with the Who on in the background.

Then I’ll get on my knees and pray
We don’t get fooled again
Don’t get fooled again
No, no!

Oh and for a man representing an institution which has been badly damaged itself by the Foreign Exchange and Li(e)bor scandals as well as its missed inflation targets this was really from an alternate universe.

FIFA “is a four-letter word,” Carney jokingly told a panel in Lima with IMF head Christine Lagarde and Brazilian Finance Minister Joaquim Levy.
“Ultimately it is about accountability to global citizens,” he said. “It’s a pretty mild criticism to say FIFA lost sight of that.”

It’s all about the trade
It was nice of the Office for National Statistics to set the background in today’s release.

In volume terms (chained volume measure) the UK has been running a consistent trade deficit (as a percentage of GDP) since quarter 1 (January to March) 1998.

However the Bank of England chose in its latest meeting Minutes to put a positive spin on all of this.

The revised estimates had shown a smaller current account deficit over the past year. In 2015 Q2, it was estimated to have been 3.6% of nominal GDP, after a peak of 6.3% in 2014 Q4. In the previous vintage of data, the deficit had peaked at 7.1% in 2014 Q3, and had improved only modestly since then.

Actually the numbers are still poor just less poor than they were so let us examine the reason for it.

Around 40 per cent of the improvement over the past six months was a consequence of an increase in the primary income balance………A narrowing in the trade deficit, to 0.7%, had accounted for a further half of the narrowing of the current account deficit since its peak last year.

Okay so the Bank of England welcomes an improvement so in the era of Forward Guidance what happens next?

In the 3-months to August 2015, the trade in goods deficit widened by £1.8 billion to £31.4 billion. Exports decreased by £1.5 billion to £72.4 billion and imports increased by £0.3 billion to £103.8 billion over the same period……
In the 3-months to August 2015, the UK’s deficit on trade in goods and services was estimated to have been £8.1 billion; widening by £1.3 billion when compared with the 3-months to May 2015.

Sadly the more recent position is in fact even worse than that as June had for once virtually no deficit at least by UK standards at £400 million but you get the idea that it was followed by July at £4.4 billion and August at £3.3 billion. So the last two months have been a return to a much worse trend. Should this continue then it will be a drag on UK GDP (Gross Domestic Product) as one of the reasons for the better number in the second quarter was the improved trade performance which looks as though it has faded away.


Imputed Rent
I feel a bit like Brian “class of one” Clough when I venture into this area as elsewhere it barely merits a mention but it has now popped up in the trade figures under “Withdrawal of income from quasi-corporations (cross border-property income)”. Hardly friendly is it? So sorry about that but the numbers published make even less sense than usual.

The impact increases gradually over time with an upward revision to exports of services of £0.5 billion and £3.5 billion in 2014, leading to a reduction in the trade in services surplus by approximately £3.0 billion.

I have pointed out to the ONS that this only makes sense if the £3.5 billion is an upwards revision to imports. There was a time when £3 billion was a lot of money but this is another downside to the UK property boom.


Construction Output
Let me analyse this in the style of the Bank of England Minutes. “On the one hand” it is going rather well. From Markit:

Construction firms enjoyed a strong finish to the third quarter of 2015, as a sustained rebound in new development projects continued to have an impact on the ground.

Meanwhile “On the other hand” it isn’t. From the UK ONS.

In August 2015, output in the construction industry was estimated to have decreased by 4.3% compared with July 2015 and decreased by 1.3% compared with August 2014. This was the first year-on-year fall since May 2013.

The former includes September but it was very positive for August too.
As it would have been the 75th birthday of John Lennon then let me use his words as a summary of how we are left.

Help me, get my feet back on the ground
Won’t you please, please help me, help me, help me, ooh

Comment
Things are not going so well for Mark Carney’s Flying Circus are they? Somehow or the other he feels the need to keep the illusion going that he and his colleagues will raise Bank Rate. Today’s official numbers have headed in the opposite direction with us having 2 months of poor current account numbers and the official construction numbers falling. Of course there was a time that we would raise interest-rates in response to poor trade figures (and indeed a house price/rent boom) but such thoughts have long since been erased and redacted from the  minds of modern central bankers.


Also my theme of official data being unreliable has had a good day. No sooner had the Bank of England become a cheerleader for the UK trade figures the numbers got worse again! The song lasted a lot longer! The downwards revision to services by £3 billion for 2014 makes you think to say the least especially as it comes via Imputed Rent which usually boosts GDP.


I am glad that I wrote to the Professor Sir Charlie Bean UK Economic Statistics Review about our services trade numbers.
As to the official construction series well I think I will stick to counting cranes in Nine Elms.