This report is courtesy of the Black Country Chamber of Commerce.
Bank of England February Report significant points:
There has been a softening of UK growth forecasts from 2.5% to 2.2%
Spare capacity in UK is 0.3% of GDP and unemployment is below 5%, which leaves little room for manoeuvre within the current downturn – this may lead to price pressure
A corporate cash balances are high (lessons learned from the recession) and because lending from the non-banking sector has grown, any issues within the financial sector are not expected to have a catastrophic effect on a globally resilient UK
Global growth outlooks are fuelling the 7% drop in equity; growth expectations amongst emerging economies have dropped significantly as a result of the drop in commodity prices (Less investment and bank lending tightening). Growth expectations in advanced economies has risen (where 75% of our exports go to)
Oversupply is the reason why the oil prices are dropping. Some commentators are expecting prices to drop to $10 a barrel
Productivity in the UK is rising but more business investment is required to consolidate
Click here to view the full Bank of England February 2016 Inflation Report.
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As you may or may not know, one of the partners at Omni Chartered Accountants sits on the Bank of England review panel.
Topics that are of specific interest to the monetary policy committee at present and that are for inclusion in the next meeting are:
Key issues for next Bank of England meeting:
1. International issues
Have there been any effects from the increase in sterling since May on export prospects?
Has there been any noticeable change in impact as a result of the appreciation against the euro since May?
More generally, is there any sign of fallout from uncertainty about Grexit, directly or indirectly, relevant to financial stability or to the central macroeconomic outlook?
What impact is the rise in sterling having on the price of imports?
Are there different stories for different types of imports? And what is the speed of pass through to consumer price inflation?
What are the prospects for the housing market and housebuilding, given the recent pickup in new buyer enquiries and mortgage approvals?
What explains the recent pickup in housing market activity?
What are the implications for house prices?
How is buy-to-let activity evolving?
3. Employment and wage inflation
Are there any signs of changes (or expectations of changes) in trends in the composition of employment that might affect growth in average weekly earnings (or total paybill per head)?
4. Demand for credit
How are the proceeds from corporate borrowing currently being used?
Are firms refinancing existing debt whilst rates are low, building cash reserves for future acquisitions or borrowing to invest in capital?
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