Economic Outlook Briefing for CIC Peter Andrews Agency for Greater London Bank of England November 2014

Greater London Agency Overview

Greater London Agency Aug GDP projection, mkt interest rate expectations and £375 bn purchased assets Nov GDP projection, mkt interest rate expectations and £375 bn purchased assets

Greater London Agency Market expectations for UK, US and euro-area interest rates have fallen since August Sources: BoE, Bloomberg, ECB and Federal Reserve.

Greater London Agency Chart 2 CPI inflation projection based on market interest rate expectations and £375 billion purchased assets

Greater London Agency Table 5C Key Judgements Global growth picks up only gradually following recent weakness, particularly in the Euro area. Domestic demand growth is sustained by further declines in private sector saving and a gradual revival in average real incomes. A modest recovery in productivity underpins output growth so that the pace at which slack is absorbed slows. As import costs stop falling, their drag on inflation wanes, and a pickup in unit labour cost growth gradually returns inflation to the 2% target.

Greater London Agency Demand

Greater London Agency Recovery in expenditure more weighted towards investment

Greater London Agency. Sources: ONS and Bank calculations Household saving ratio (a)

Greater London Agency Business investment growth driven by the service sector

Greater London Agency PNFC lending outside real estate sector picks up

Greater London Agency Near-term outlook for external demand revised down Sources: Eurostat, IMF World Economic Outlook Oct 2014, OECD, ONS, Thomson Reuters, Datastream, US Bureau of Economic Analysis and Bank calculations.

Greater London Agency UK current account deficit historically large

Greater London Agency Housing

Greater London Agency Loan to income multiples had risen New mortgages for house purchase at LTI multiples >= 4.5 Sources: FCA Product Sales Data and Bank calculations.

Greater London Agency House price inflation moderated a little Sources: Halifax, Land Registry, Nationwide, ONS, Rightmove.co.uk, RICS and BoE calculations.

Greater London Agency RICS survey: regional house prices over past 3 months

Greater London Agency Approvals for home movers weakening Sources: Bank of England, Council of Mortgage Lenders (CML) and Bank calculations.

Greater London Agency New building is driving housing investment

Greater London Agency Output and supply

Greater London Agency Output growth by sector

Greater London Agency Agents’ scores for output growth

Greater London Agency Unemployment rate projected to fall further Sources: Labour Force Survey and Bank calculations.

Greater London Agency Employment growth among the lower skilled Sources: Labour Force Survey and Bank calculations.

Greater London Agency Some slack remains in the labour market Sources: ONS (including the Labour Force Survey) and Bank calculations.

Greater London Agency Productivity growth (a) Sources: ONS and Bank calculations.

Greater London Agency Costs and prices

Greater London Agency CPI inflation projected to fall in Q4

Greater London Agency Import price inflation (a) Sources: ONS and Bank calculations.

Greater London Agency Unit labour costs growth has stopped Sources: ONS and Bank calculations.

Economic Outlook Briefing for CIC Peter Andrews Agency for Greater London Bank of England November 2014