2. Dennis Turner, Chief Economist, HSBC UK Economic Outlook Bumping along…

3. Bumping along…. Dennis Turner HSBC Bank plc UK ECONOMIC OUTLOOK September 2010

4. THE RECESSION IS OVER

5. A deep recession

6. ALL THE LEVERS PULLED

7. Fiscal policy loosened

8. Government finances already in deficit

9. And deteriorated rapidly March 2010 Budget Report

10. Net debt (as a % of GDP) soaring Sustainable Investment Rule March 2010 Budget

11. Interest rates fall to historic lows

12. The lowest for over 300 years

13. And sterling plummeted

14. Sterling takes a pounding US dollar / £ (L axis) euro / £ (R axis )

15. STRAWS IN THE WIND

16. An end to destocking

17. Key PMI surveys in positive territory expansion contraction

18. Housing market fragile but improving rising falling House prices:

19. Exports starting to respond

20. A slow recovery is underway Forecast

21. RISKS

22. a) Debt overhang

23. Consumers were the driving force

24. But underpinned by borrowing

25. b) Fragile consumer sector

26. So real earnings squeezed

27. A slower recovery than the last recession Forecast

28. Consumer confidence still weak Long-term average

29. c) Public sector spending cuts

30. Planned government spending cuts (£bn)

31. Govt receipts and spending (% of GDP)

32. d) Slow growth in key export markets

33. Euro Area growth forecast Euro Area Annual GDP growth:

34. Euro Area growth forecast 2 Euro Area Annual GDP growth:

35. Exports are starting to respond Volume of UK goods exports:

36. f) Banking and credit problems

37. Funding issues

38. An injection of £200bn via QE

39. Credit growth still very subdued Lending to households Lending to businesses Annualized growth in outstanding lending

40. SHORT-TERM OUTLOOK

41. Slow fragile growth

42. Inflation – higher for longer Forecast Target Range

43. And interest rates start to turn Forecast

44. The exchange rate is favourable Sterling weaker US$ / £ (L axis) euro / £ (R axis ) HSBC forecast

45. THE NEW AGENDA

46. Where will growth come from?

47. Manufacturing output Volume of output, 1950-2009 Manufacturing output

48. Manufacturing vs services GDP Services Volume of output, 1950-2009 Manufacturing

49. THANK YOU