An economic update

By Liam Byrne MP

This week we’ve seen one of the key forward-looking indicators of business confidence – the purchasing managers index for Britain’s services sector – move up to a 17-month high of 53.2 for July (surpassing expectations for an increase to 51.6). Office for National Statistics data shows an 0.5% jump in June’s industrial production (the largest rise in 20 months) and Halifax says British house prices saw a 1.1% monthly rise in July.

Commenting today, Paul Krugman writes:

‘Two months ago I wrote that there were hints of a relatively quick economic turnaround in Britain. Now those hints have gotten much stronger. Basically, aggressive monetary policy and the depreciation of the pound are giving Britain a boost relative to other advanced countries’.

Finally, the Bank of England has decided to to continue with its programme of asset purchases financed by the issuance of central bank reserves and to increase its size by £50 billion to £175 billion (the ‘qe’ programme), commenting:

“On the one hand, there is a considerable stimulus still working through from the easing in monetary and fiscal policy and the past depreciation of sterling. On the other hand, the need for banks to continue repairing their balance sheets is likely to restrict the availability of credit, and past falls in asset prices and high levels of debt may weigh on spending”.

This post was first published on Liam Byrne’s blog.