5th April 2012
Welcome to Maundy Thursday which is the forerunner of Easter so let me wish all readers a Happy Easter too. In the UK today there is a celebration in which the monarch presents Maundy money to deserving recipients, which these days usually means pensioners. As the number of recipients depends on the monarch's age then there will be more than a few today grateful for the long reign of Queen Elizabeth II. And fans of both flat money and currency based on precious metals can enjoy this as the coin set presented is minted in sterling silver. Rather oddly when the currency was debased in 1947 (the silver content was removed) Maundy money was rebased and returned to its previous sterling silver status.
Speaking of Currency debasement
The Bank of England has a policy meeting today. It will discuss an extension of its Quantitative Easing programme which has so far spent some £307.77 billion of its target of £325 billion but it does face a potential problem. At the current rate of purchases of £4.5 billion a week it will run out of ammunition before its next meeting. It gains a benefit in this sense from the two bank holidays of Easter Monday and the Mayday bank holiday as it makes it purchases on Monday,Tuesday and Wednesday but the next meeting is slightly later in the month (9&10th of May) so it will just run out at the current rate of purchases.
There are possible ruses such as not buying in Easter week for example which could possibly provide some breathing space. But I suspect that the two members who voted for an increase in the target to £350 billion last month (Adam Posen and David Miles) will be pressing their case hard. So whilst the consensus today is for an unchanged announcement there is a possibility of a move on the target for quantitative easing to £350 billion. The positive purchasing managers reports we have received this week will be against it but it has a chance I think.
Today’s industrial production figures may stimulate the debate
A little nudge may have been given by this mornings releases on industrial and manufacturing production.
The seasonally adjusted Index of Production fell by 2.3 per cent in February 2012 compared with February 2011
The seasonally adjusted Index of Manufacturing fell by 1.4 per cent in February 2012 compared with February 2011
The month on month picture for industrial production rose by 0.4% but the manufacturing number was minus 1%. Indeed if we look at the overall breakdown we see this.
Mining & quarrying, gas and electric & water supply and sewerage increased by 3.8 per cent, 6.1 per cent and 1.3 per cent respectively. These rises were partially offset by a fall in manufacturing of 1.0 per cent.
So whilst I do not wish to decry the industries which rose they are not ones which seem likely to drive the UK economy forwards and the one that might,manufacturing fell! And if we look further into the report the February rise was on the back of a downwards revision to the January data so the net gain was only half of what it looks.
This month, the period open for revision is January 2012 only. Month on month, the Index of Production has been revised down by 0.2 per cent from -0.4 per cent to -0.6 per cent.
Even worse, look at what drove it down.
…his has been more than offset by a downward revision to manufacturing of 0.4 per cent.
For those who are fans of the underlying numbers then UK industrial production is at 90.4 and manufacturing production is at 94.4 where 2008=100.
Where does this leave us? Probably with a no change announcement as the level of growth in services looked quite strong in the purchasing managers index for March but there is some doubt I think. And if not this month then next.
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