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Posts Tagged ‘think tank’

The bank of England is expected to launch another round of quantitative easing (QE) this week, in the hope of preventing the UK falling into another recession, after the economy contracted by 0.2 per cent at the end of last year.

The bank is likely to pump at least £50 billion into the economy by purchasing government gilts from pension funds and insurers with electronically created money.

This round of QE, which is designed to bring down borrowing costs, follows a £75 billion injection into the economy last October.

Since the QE programme started in March 2009, the Bank has bought £275 billion in gilts.

A final decision on the latest round of QE will be made at this week’s Monetary Policy Committee (MPC) meeting.

Some economists believe that last week’s welcome news that the UK’s manufacturing and services sector has grown to its highest level for ten months may lead the MPC to review the scale of the latest round of QE.

Last week The National Institute of Economic and Social Research (Niesr) called for the government to ease back on spending cuts in order to encourage the economy to grow.

The think tank warned that the UK economy will enter recession in the first half of 2012 if households continue to cut back on their spending.

Niesr forecasts that the economy will shrink 0.1% in 2012, however if the eurozone debt crisis is resolved the UK economy could grow 2.3% in 2013, it said.

“We forecast a return to technical recession in the first half of this year, as households continue to retrench, credit conditions remain tight, and businesses are reluctant to invest given uncertainty about both domestic and foreign demand,” the think tank said in its UK and World Economy Forecast.

The UK economy needs a fiscal boost of £10 billion to £20 billion in order to avoid another recession, a leading think tank said today.

In its annual Green Budget, The Institute for Fiscal Studies calls for Chancellor George Osborne to include a short-term fiscal stimulus in his budget.

This would buffer the UK economy against the eurozone crisis and the possibility of another recession which could see GDP falling in 2012 and 2013, and a substantial increase in national debt.

The stimulus could take the form of a temporary reduction in employers’ National Insurance contributions or VAT, or could be achieved by increasing investment spending.

‘Should the eurozone break up, or the economy do much worse than forecast for other reasons, then future borrowing would be increased and one – or both – of the Chancellor’s fiscal targets would be broken,’ the IFS said.

The think tank has cut its forecast for UK economic growth to just 0.3 per cent, substantially lower than Government’s 0.7 per cent target.

The report claims that the scale of the government’s austerity strategy is “almost without historical or international precedent” but by the end of the current financial year only 6% of the cuts will have been implemented.

The government is expected to beat its 2011/12 deficit reduction target of £127 billion by £3 billion.

IFS director Paul Johnson said: “The Chancellor faces his third Budget with the economy and public finances in considerably weaker shape than he had hoped a year ago.

“While it looks as though central Government is going to underspend against tight spending plans, this neither leaves much space for any permanent fiscal loosening nor avoids the fact that the vast majority of the planned – and unprecedentedly big – public service cuts are still to come.”

There was also some good news on the economy today, with Markit’s/Cips’ purchasing managers’ index (PMI) revealing that the UK manufacturing sector has returned to growth.

In January, activity in the manufacturing sector was at its highest level for eight months, reaching 52.1 points on the PMI index, where a reading above 50 indicates growth.

This represent a significant improvement from 49.7 in December, with manufacturing output and new orders increasing while manufacturing costs fell.

Don’t feel like upgrading from 3G to 4G wireless technology? You could be playing a role in the country’s high unemployment rate.

Washington think tank NDN recently released a study that compared advances in wireless technologies with changes in statewide employment. Between April 2007 and June 2011 — during the worst of the recession — the country lost 5.3 million jobs in the private sector, yet America’s fixation with technology and the switch from 2G to 3G led to the creation of 1.6 million jobs (via CNN Money).

The nation’s mobile e-commerce sales experienced substantial growth, increasing from $1.4 billion in 2009 to between $6 billion and $9 billion in 2011.

This growth has been the country’s solution to getting out of the recession since many startups — especially cloud-based companies — rely on broadband networks to deliver their services. NDN’s researchers concluded that the “development and adoption of new cellular technologies have promoted economic growth and employment” and that the “rapid transition from 3G to 4G mobile broadband networks should continue to stimulate new job creation in a short time frame.”

By September 2012, the nationwide 4G transition is expected to directly create nearly 250,000 domestic jobs. Upgrading the public’s smartphones and tablets will employ more workers and affect the online retail, health care, energy and business service industries the most.

Next time, you consider upgrading to the next generation of wireless technology, get yourself a better phone, a faster toy to play with and provide a couple hundred thousand jobs for Americans.

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The Munich-based Ifo think tank has today revealed confidence among German firms fell for the third consecutive month in September.

The closely-watched Business Climate Index dipped to 107.5 this month from August’s reading of 108.7 – this represented the lowest level since June 2010.

However, the fall was not as bad as the 106.5 economists had expected.

The fall was attributed to the ongoing debt crisis in the euro zone which could impact on the wider economy.

Ifo surveys around 7,000 German manufacturing, construction, wholesale and retail companies each month.

Commenting on the data, Ifo President Hans-Werner Sinn said: “The business expectations for the coming half year once more deteriorated markedly.”

However, one analyst said the figures suggest that Germany will not fall into a recession.

Meanwhile, a sub-index on expectations also edged lower to 117.9 from 118.1 in August – but again this was less than forecast.

Germany, which has been regarded as Europe’s powerhouse, has been driving the recovery of the euro zone but a recent slew of weak data has forced many to re-evaluate its assessment of the economy.

Statistics office Destatis recently revealed German exports fell more than expected in July.

According to Destatis, exports fell by 1.8% in July on a monthly basis compared with a 1.2% drop in June. Economists had forecast a 0.1% fall for the month.

The sharp fall in exports will be of grave concern for the country’s Government. Export demand helped to bring Germany out of recession in the second quarter of 2009 – much sooner than many of its counterparts throughout the world.

Last week, the European Commission slashed its growth forecasts for the euro zone and warned that the 17-member nation may come “close to standstill at year-end.”

Furthermore, the Washington-based International Monetary Fund recently lowered its growth forecasts for both Germany and the euro zone this year and next.

It expects Germany’s economy to grow 2.7% this year and 1.3% in 2012.

Recovery of the UK economy is to remain sluggish, with GDP slowing to 0.2% in the June to August period, the National Institute of Economic and Social Research (NIESR) predicts. This compares with a 0.6% rate in the three months to July. The influential think tank believes if the weakness continues, the Bank of England [...]