Inflation Report May 2010

Demand

Chart 2.1 Contributions to quarterly growth in nominal GDP (a) (a) At market prices. Contributions may not sum to total due to rounding.

Chart 2.2 Indicators of household spending on goods (a) (a) Chained-volume measures. (b) Excluding spending on purchases of vehicles and electricity, gas and other fuels. Data are only available to 2009 Q4.

Chart 2.3 Contributions to annual growth in real post-tax labour income (a) Household taxes are income tax and Council Tax. (b) Divided by the household expenditure deflator. (c) General government benefits minus employees’ National Insurance contributions. (d) Calculated as wages and salaries plus mixed income, divided by the household expenditure deflator.

Chart 2.4 Indicators of consumer confidence Sources: Research carried out by GfK NOP on behalf of the European Commission, Nationwide and YouGov. (a) Unless otherwise stated. (b) This aggregate confidence index is derived by averaging the answers to questions 1, 2, 3, 4 and 8 in the GfK NOP survey carried out on behalf of the European Commission. (c) Overall prosperity index derived from the answers to questions 1, 2d, 4 and 5 of the YouGov survey. Differences from average since January (d) Differences from average since May 2004.

Chart 2.5 Business investment and GDP (a) (a) Chained-volume measures. (b) Recessions are defined as at least two consecutive quarters of falling output (at constant market prices) estimated using the latest data. The recessions are assumed to end once output began to rise.

Chart 2.6 Factors limiting investment by sector: uncertainty about demand (a) Source: CBI. (a) The question asks whether uncertainty about demand is likely to limit capital expenditure authorisations over the next twelve months. (b) Covers the consumer, business and professional service sectors. The services balances are available from 1998 Q4

Chart 2.7 Financial balances by sector (a) Recessions are defined as in Chart 2.5. (b) Includes non-profit institutions serving households. (c) Excludes public corporations.

Chart 2.8 Stockbuilding (a) (a) Chained-volume measures. Excluding the alignment adjustment.

Chart 2.9 Public sector net borrowing (a) Sources: HM Treasury and ONS. (a) The chart shows financial year net borrowing data. The orange bars show data consistent with the projections published in the Budget on 24 March The chart has not been updated to reflect the public sector finances data released on 22 April 2010.

Chart 2.10 Domestic demand in selected euro-area countries (a) Sources: Eurostat and ONS. (a) Chained-volume measures. The figures in parentheses show the shares of UK nominal exports accounted for by each country in 2008.

Chart 2.11 Contributions to quarterly growth in US GDP (a) Source: Bureau of Economic Analysis. (a) Chained-volume measures.

Chart 2.12 UK goods exports and world imports of goods (a) Sources: CPB Netherlands Bureau for Economic Policy Analysis and ONS. (a) Volume measures. (b) Data are weighted by shares in world imports. (c) Excluding the estimated impact of MTIC fraud.

Tables

Percentage changes on a quarter earlier Averages –2008 Q1 Q2 Q3 Q4 Household consumption (b) Government consumption Investment of which, business investment of which, dwellings investment (c) Final domestic demand Change in inventories (d)(e) Alignment adjustment (e) Domestic demand ‘Economic’ exports (f) ‘Economic’ imports (f) Net trade (e)(f) Real GDP at market prices Table 2.A Expenditure components of demand (a) (a) Chained-volume measures. (b) Includes non-profit institutions serving households. (c) Whole-economy dwellings investment. (d) Excludes the alignment adjustment. (e) Percentage point contributions to quarterly growth of real GDP. (f) Goods and services, excluding the estimated impact of missing trader intra-community (MTIC) fraud.

Table 2.B Mortgage arrears and repossessions Source: Council of Mortgage Lenders. (a) Mortgages in arrears as a percentage of outstanding mortgages, at the end of the specified period. (b) Earliest observation. (c) Flow of repossessions during each period, as a percentage of outstanding mortgages. For each quarter, the observation is based on the flow of repossessions over that quarter and the preceding one, and the stock of outstanding mortgages in that quarter Series high H1 H2 H1 Q3 Q4 Mortgage arrears (a) Three to six months 1.82 (1994 H1) (b) Six to twelve months 2.07 (1992 H2) More than twelve months 1.58 (1993 H1) By more than 2.5% of outstanding balance 4.12 (1995 H1) Repossessions (c) 0.40 (1991 H2)

Table 2.C Surveys of investment intentions (plant and machinery) (a) Sources: BCC, CBI, CBI/PwC and ONS. (a) Net percentage balances of companies who say they have increased planned investment in plant and machinery over the past three months (BCC), or revised up planned investment in plant and machinery over the next twelve months (CBI). Measures weight together sectoral surveys using shares in real business investment. BCC data are non seasonally adjusted and cover the manufacturing and services sectors. CBI data cover the manufacturing, distribution, financial services and consumer/business and professional services sectors. Net percentage balances Averages –2007 H1 H2 H1 H2 Q1 BCC CBI

Table 2.D General government deficits and gross debt in selected euro-area countries in 2009 Source: Eurostat. (a) Net borrowing is total general government expenditure minus total general government revenue. (b) General government consolidated gross debt. Percentages of nominal GDP at market prices General governmentGeneral government deficit (a) debt (b) Greece Ireland Italy Portugal 9 77 Spain 11 53

Table 2.E GDP in selected Asian economies (a) Sources: Ministry of Trade and Industry Singapore, ONS, Thomson Reuters Datastream and Bank calculations. (a) Chained-volume measures. The figures in parentheses show shares in UK nominal exports in Data for China, Hong Kong and India are non seasonally adjusted. (b) Unless otherwise stated. (c) Chinese data show annual GDP growth. Average is between 2000 Q1–2008 Q4. (d) The 2010 Q1 observation is based on an advance estimate that has been de-annualised. (e) Average is between 2004 Q3–2008 Q4. Percentage changes on a quarter earlier (b) Averages –2008 Q1 Q2 Q3 Q4 Q1 Japan (2.1) n.a. China (c) (1.8) Singapore (d) (1.5) India (e) (1.4) n.a. Hong Kong (1.4) n.a. South Korea (0.9)

Recent developments in UK imports

Chart A UK imports and import-weighted demand (a) Sources: ONS and Bank calculations. (a) Chained-volume measures. (b) Excluding the estimated impact of MTIC fraud. (c) Calculated by weighting household consumption (including non-profit institutions serving households), whole-economy investment (excluding valuables), government spending, stockbuilding (excluding the alignment adjustment) and exports (excluding the estimated impact of MTIC fraud) by their respective import intensities. Import intensities are estimated using the United Kingdom Input-Output Analytical Tables, 1995.

Chart B UK import penetration and relative import prices (a) Sources: ONS and Bank calculations. (a) The vertical lines mark the beginning of the major nominal exchange rate movements that began in 1992 Q3 (a depreciation), 1996 Q2 (an appreciation) and 2007 Q3 (a depreciation). (b) Import prices divided by the GDP deflator. (c) UK imports as a proportion of import-weighted demand. Import and export data exclude the estimated impact of MTIC fraud.