Presentation to Cornwall Council Private Developers Forum 2

Presentation to Cornwall Council Private Developers Forum 2 nd March 2012 Geoff Harding Deputy Agent for South West England

Overview South West Agency

Quarterly figures: 2011 Q 1 0. 3 % Q 2 0. 0 Q 3 0. 5 Q 4 -0. 2 Annual: 0. 8 % South West Agency

GDP projection based on market interest rate expectations and £ 325 billion asset purchases South West Agency

Projection of the level of GDP based on market interest rate expectations and £ 325 billion asset purchases South West Agency

Bank rate and forward market interest rates Sources : Bank of England Bloomberg. South West Agency

Conditioning path for Bank Rate implied by forward market interest rates(a) South West Agency

Survey measures of capacity utilisation Sources: Bank of England, BCC, CBI/Pw. C and ONS. South West Agency

Unemployment rates Source: ONS (including Labour Force Survey). South West Agency

Self-employment(a) Source: Labour Force Survey. South West Agency

Broad money(a) South West Agency

The construction sector – recent history South West Agency

South West Agency

to Q 4 2011, at constant 2005 prices South West Agency

South West Agency

South West Agency

South West Agency

South West Agency

Prospects South West Agency

Contributions of expenditure components to changes in demand in recessions and recoveries South West Agency

Household consumption and real income South West Agency

Survey measures of household expectations Source: Research carried out by Gf. K NOP on behalf of the European Commission. South West Agency

Household saving ratio South West Agency

CPI Inflation projection based on market interest rate expectations and £ 325 billion asset purchases South West Agency

Direct contribution of energy prices to CPI inflation and Bank staff’s central estimate of VAT contribution Sources: Bloomberg, Department of Energy and Climate Change, ONS and Bank calculations. South West Agency

Contributions to CPI inflation South West Agency

US dollar oil and commodity prices Sources: Bloomberg, S&P indices and Thomson Reuters Datastream. South West Agency

Inflation expectations for a year ahead Sources: Bank of England, CBI (all rights reserved), Citigroup, ONS and You. Gov. South West Agency

Public sector net borrowing(a) Sources: HM Treasury, OBR Economic and Fiscal Outlooks (EFO) and ONS. South West Agency

Business investment and surveys of investment intentions Sources: Bank of England, BCC, CBI/Pw. C and ONS South West Agency

Factors likely to hold back investment Sources: CBI, CBI/Pw. C and ONS. South West Agency

Credit conditions South West Agency

Loans to individuals and private non-financial corporations South West Agency

Lending to small and medium-sized enterprises(a) Sources: Bank of England, BBA, BIS and Bank calculations. South West Agency

Net funds raised by UK businesses(a)(b) Sources: Bank of England, BBA, BIS and Bank calculations. South West Agency

UK banks’ leverage South West Agency

UK banks’ indicative longer-term funding spreads Sources: Bank of England, JPMorgan Chase & Co. , Markit Group Limited and Bank calculations. South West Agency

Credit Conditions Survey: spreads over reference rates on lending to corporates by firm size(a)(b) South West Agency

Stock of lending to UK PNFCs(a)(b) Source: Bank of England. South West Agency

Credit Conditions Survey: availability of credit to households(a) South West Agency

Bank Rate and average quoted interest rates on new household borrowing South West Agency

Mortgage lending by the major UK lenders(a) South West Agency

SUMMARY • Growth outlook: a pick-up in 2012 H 2, driven by better prospects for consumption as inflation comes down and real incomes stop falling • Factors such as the Diamond Jubilee and the Olympics will disrupt the pattern of demand. • Uncertainties remain regarding the household savings rate • Increased uncertainty is holding back investment, but a pick-up in consumption should have ‘accelerator’ effects. • Other components of demand – Government, net trade, stock building -- will be negative or flat at best. • Inflation has begun its long-promised fall as temporary factors unwind. • The risk that inflation will fall below target with continuing slack in the economy is being mitigated by the increase in QE. South West Agency

Presentation to Cornwall Council Private Developers Forum 2 nd March 2012 Geoff Harding Deputy Agent for South West England

Real house prices following banking crises Sources: OECD and Bank calculations. South West Agency

Chart 1. 10 UK banks’ indicative longer-term funding spreads Sources: Bank of England, JPMorgan Chase & Co. , Markit Group Limited and Bank calculations. South West Agency

Indicative median interest rates on new SME variable-rate facilities(a) Sources: Bank of England, BIS and Bank calculations. South West Agency