My pro.manchester economics review for the first quarter of 2011 is available on line and in hard copy. I love economics, it is a passion. It is with great pleasure, I offer the review to lovers of economics. Through last year, I was suggesting that growth would be above trend, inflation would remain stubbornly high and interest rates would have to rise to offset the inflation threat and mitigate the impact of import prices, particularly dollar denominated commodity prices.
In January 2009, I cautioned the devaluation of Sterling would have little impact on the trade deficit. There would be a cyclical fall of around £10 billion in the trade in goods deficit, (it was £11 billion) but as the economy recovers in 2010, the trade deficit would continue to increase.(it did).
The theme of the first quarter review is rebalancing the economy. The Chancellor is on track to meet the spending target, the Governor is off track in his belief Inflation will fall to target and Sterling will rebalance the economy towards net trade growth.
Interest rates are set to rise, doves on the MPC are flying the coop. Spencer Dale Chief Economist at the Bank of England is the latest hawk to squawk and join Andrew Sentance (with us in April) and Martin Weale. Rates are set to rise.
“Despite the best efforts of policy makers, the recovery will remain on track for 2011. We continue to expect above trend growth, stubborn inflation and a steady rise in base rates”
The pro.manchester outlook is slightly contrarian. The review is produced on the basis that growth in the current year will be ahead of expectations at 2.6%, inflation will be around 3.6% by the end of the year but will not fall to target thereafter. Government borrowing will fall faster than the consensus forecast but there will be no improvement in the current account as outlined.
As expected the GDP figure for Q4 was revised. It went down rather than up! Who would be a forecaster. Even so snow adjusted growth was over 2%. All eyes will be on the first quarter GDP performance.
The on line PDF can be found here :
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The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts. JKA is Chief Executive of pro.manchester, a director of Marketing Manchester and a visiting professor at MMU Business School. An economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University.