07/26/2021 | Press release | Distributed by Public on 07/26/2021 03:25
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Date: 26th July 2021
In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the latest UK economic data:
· Public sector net borrowing (PSNB) was £22.8bn in June 2021 and, even though lower than in June 2020, it was still the second highest June borrowing since monthly records began in 1993.<_o3a_p>· Debt interest payments rose sharply in June 2021 to £8.7bn (compared with £2.7bn in June 2020), reflecting the higher payments on index-linked gilts (gilts linked to the RPI) as inflation has increased.<_o3a_p>· The PSNB for the first three months of FY2021 (March-June) is running some 20% below the OBR's expectations in March 2021.<_u13a_p><_o3a_p>· The IFS estimated that the PSNB for full year FY2021 may be some £30bn less than forecast by the OBR. But they warned that, even though the short-term outlook had improved, the medium-term was less favourable and 'the Chancellor was likely to have very little room for manoeuvre in his forthcoming Spending Review'. <_o3a_p>· Public sector net debt (PSND) continues to rise. At end-June PSND was £2,218.2bn, 99.7% of GDP, the highest ratio since the 102.5% recorded in March 1961.<_o3a_p>· Retail sales rose 0.5% (MOM) in June, after slipping in May.<_o3a_p>· The latest Markit survey suggests growth slowed in July, partly reflecting the impact of COVID isolation rules and other restrictions due to the pandemic.<_o3a_p>International update:<_o3a_p>
· The latest Markit surveys for the Eurozone and the US show continued strong growth in July, albeit with some easing in the US.<_o3a_p>· At its July meeting the Governing Council of the ECB acted in order '…to underline its commitment to maintain a persistently accommodative monetary policy stance to meet its inflation target.' There were no policy changes. The inflationtarget was modified recently to be a symmetric 2% inflation target, compared with the previous 'close to but below 2%' target.<_o3a_p>· The Federal Open Market Committee (FOMC) meets this week. Interest will probably focus on the Fed's explanation for rising inflation (CPI inflation rose to 5.4% in June). To date, it has largely attributed higher inflation to 'transitory' effects. <_o3a_p>Ruth Lea said 'Even though public borrowing is lower this year than last, it is still very substantial. And, even if borrowing comes in at around £200bn for FY2021, this is still around 9% of GDP. Moreover, the jump in debt interest payments in June reminds us just how vulnerable these payments are to higher inflation as well as higher interest rates.'<_o3a_p>
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For full story: http://www.arbuthnotgroup.com/economic_perspectives_group.html
Press enquiries:
Arbuthnot Banking Group PLC:
Ruth Lea, Economic Adviser
07800 608 674, 020 8346 3482
[email protected]
Follow Ruth on Twitter @RuthLeaEcon
Maitland:
Sam Cartwright
020 7379 4415
[email protected]<_o3a_p>