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London’s Economic Outlook: March 2013

London’s Economic Outlook: March 2013. Gordon Douglass GLA Economics. Overview. The general macroeconomic situation Economic indicators suggest London is performing slightly better than the UK UK economy faces a tough start to 2013

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London’s Economic Outlook: March 2013

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  1. London’s Economic Outlook:March 2013 Gordon Douglass GLA Economics

  2. Overview • The general macroeconomic situation • Economic indicators suggest London is performing slightly better than the UK • UK economy faces a tough start to 2013 • A still worrying economic environment in the Eurozone and political wrangling in the US • GLA Economics latest forecast for London’s economy

  3. UK contracted in Q4 2012 and virtually flat in 2012 Last data point: Q4 2012 Source: ONS

  4. London’s economy is growing slowly Last data point: Q3 2012 Source: Experian Economics

  5. London’s annual employment growth higher than in the UK Last data point: Q3 2012 Source: Experian Economics

  6. London’s unemployment rate is down from its peak Last data point: Oct-Dec2012 Source: ONS

  7. Claimant Count Unemployment Last data point: January 2013 Source: NOMIS

  8. Strong underground passenger growth Last data point is the 28-day period ending 5 January 2013 Source: Transport for London

  9. Annual house price inflation is higher in London than in the UK Last data point: Q4 2012 Source: ONS

  10. Surveyors reporting house prices in London are increasing whilst falling in England & Wales Last data point: January 2013 Source: Royal Institution of Chartered Surveyors

  11. Consumer confidence is negative but holding up better in London Last data point: February 2013 Source: GfK

  12. PMI survey suggests London is growing Last data point: January 2013 Source: Markit Economics

  13. Service businesses believe that their profitability will improve in the next 12 months….. Last data point: Q4 2012 Source: British Chambers of Commerce

  14. and so will their turnover Last data point: Q4 2012 Source: British Chambers of Commerce

  15. US economy virtually flat in Q4 2012 but non-manufacturing US businesses is more positive Last data point: February 2013 Source: Institute for Supply Management

  16. Eurozone GDP growth in selected countries (% change compared with previous quarter) Last data point: Q4 2012 Source: Eurostat

  17. Sterling has depreciated recently against the Euro Last data point: 5/03/2013 Source: Bank of England

  18. Forecasts for the UK economy The IMF forecast in January that it expects the UK to grow by 1.0% in 2013 and by 1.9% in 2014. HM Treasury Comparison of Independent Forecasts: As at February 2013, the average of independent forecasts was for growth of 0.9% in 2013 and 1.6% growth for 2014. The OECD’s latest forecast published in December expected a contraction of -0.1% in 2012, growth of 0.9% in 2013 and 1.6% in 2014.

  19. GLA Economics’ forecast for output growth in London (% change) – November 2012 Source: GLA Economics – LEO (Nov 2012) / Experian Economics Note: External forecasters are Cambridge Econometrics, Experian Economics, CEBR and Oxford Economics

  20. GLA Economics’ forecast for employment growth in London (% change) Source: GLA Economics – LEO (Nov 2012) / Experian Economics Note: External forecasters are Cambridge Econometrics, Experian Economics, CEBR and Oxford Economics

  21. Sector forecasts (1)(% change) Financial Services Business Services Source: GLA Economics – LEO (Nov 2012)

  22. Sector Forecasts (2)(% change) Financial & business services Transportation & storage Source: GLA Economics – LEO (Nov 2012)

  23. Sector forecasts (3)(% change) Distribution, accommodation and food services activities Other (public & private) services Source: GLA Economics – LEO (Nov 2012)

  24. Sector forecasts (4)(% change) Manufacturing Construction Source: GLA Economics – LEO (Nov 2012)

  25. Downside risks to the forecast • Eurozone sovereign debt crisis flares up again • Eurozone goes into a deeper recession hitting London exports • The US economy falters due to political wrangling • Lending to households and firms remains constrained for the foreseeable future though there are positive signs especially in the housing market due to the Funding for Lending Scheme (FLS)

  26. To conclude • London continues its bumpy recovery • The deleveraging aftermath of the financial crisis recession continues to dampen growth • In general forecasters expect London to grow slightly quicker than the UK • The large depreciation of sterling and monetary easing should continue to provide support to the economy. Although fiscal retrenchment may act as a drag on growth it has put downward pressure on interest rates and is a required part of the necessary rebalancing of the UK economy

  27. Thank youGordon Douglass • gordon.douglass@london.gov.uk

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