Monday, 13th August to Friday 17th August 2007
United Kingdom
13/8 Producer Prices (Jul)
The producer output prices data was again better than expected in June. Although seasonally adjusted raw material prices rose 0.6% on the month, it should be remembered that these only account for 25% of manufacturers' total costs of production. Much more important are unit labour costs, which, thanks to rising productivity, have fallen in each of the last two months and are in factor lower than they were 12 months ago. Meanwhile, unadjusted output prices rose 0.2% on the month, but this was from a downwardly revised base in May. As a result, the annual rate of increase was unchanged at 2.4%. However, the key feature of the data was again the subdued nature of the adjusted core producer prices figures. Although these rose 0.2% in June, this followed a downwardly revised 0.1% gain in May, which was sufficient to bring the annual rate down from 2.2% to 2.1%. This in an impressive performance given that as recently as March the figure had picked up to 2.7%, prompting reports that manufacturers were increasingly able to make price increases stick. Such concerns now look extremely misplaced. The consensus expects adjusted input prices to have risen 0.7% in July (1.3% year-on-year), whilst core output prices are projected to have increased 0.2% (2.2%).
14/8 Consumer Prices (Jul) .......Read more........
Source: ONS
Against expectations of renewed deterioration, the UK deficit in trade narrowed slightly in June. In fact at £6.3bn and £3.6bn respectively the goods deficit and the combined goods and services shortfall were the smallest since October 2005. However, once again, the improvement wasn't all it might appear. Although exports grew strongly for a second successive month, increasing by some £900 million, around £500 million of this was due to higher exports of oil. Indeed, this was sufficient to drive the oil balance back into surplus (£257 million from -£76 million) for the first time since early 2005. Consequently, the underlying goods deficit (excluding oil and erratic items) actually widened from £6.2bn to £6.4bn. Although the combined goods and services deficit for the second quarter narrowed from £12.3bn in Q1 to £11.7bn we still believe that net trade is likely to have made a negative contribution to growth in the second quarter. This is because import prices (which Bank of England used to be so worried about from an inflation perspective) fell during the quarter whilst export prices appear to have risen. As result, exports in volume terms were weaker than imports. The expenditure split of Q2's 0.8% increase in GDP is going to make for interesting reading.
John Clarke
Economic Adviser
ODL Securities
Against expectations of renewed deterioration, the UK deficit in trade narrowed slightly in June. In fact at £6.3bn and £3.6bn respectively the goods deficit and the combined goods and services shortfall were the smallest since October 2005. However, once again, the improvement wasn't all it might appear. Although exports grew strongly for a second successive month, increasing by some £900 million, around £500 million of this was due to higher exports of oil. Indeed, this was sufficient to drive the oil balance back into surplus (£257 million from -£76 million) for the first time since early 2005. Consequently, the underlying goods deficit (excluding oil and erratic items) actually widened from £6.2bn to £6.4bn. Although the combined goods and services deficit for the second quarter narrowed from £12.3bn in Q1 to £11.7bn we still believe that net trade is likely to have made a negative contribution to growth in the second quarter. This is because import prices (which Bank of England used to be so worried about from an inflation perspective) fell during the quarter whilst export prices appear to have risen. As result, exports in volume terms were weaker than imports. The expenditure split of Q2's 0.8% increase in GDP is going to make for interesting reading.
John Clarke
Economic Adviser
ODL Securities
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