Economics weekly by Lloyds TSB

In the UK, Friday’s preliminary Q1 GDP data release is crucial in its own right, but takes on extra importance so close to the general election on 6 May. Recently-published February industrial output figures UK election build-up to shine spotlight on Q1 GDP…

In the UK, Friday’s preliminary Q1 GDP data release is crucial in its own right, but takes on extra importance so close to the general election on 6 May. Recently-published February industrial output figures – which surprised on the upside – argue for a reasonably firm GDP number. We look for an outturn of +0.4% quarter-on-quarter. Meanwhile, we look for CPI to register 3.1% in the year to March, slightly above February’s outturn of 3.0%. We see few special factors affecting the inflation arithmetic although we note that the Budget 2010 increases in tobacco and alcohol duties (with a combined impact of +0.14% month-on-month), are unlikely to feed through until April’s CPI is published on 18 May. Beyond this, the ‘bigger picture’ is for a high degree of spare capacity in the economy to drag on overall price pressures. Elsewhere, we look for a modest fall in March claimant unemployment (just 5k), while we expect total retail sales volumes to have expanded by 0.8% m/m. Finally, we expect the MPC’s decision in April to leave Bank Rate on hold at 0.5% and maintain its Asset Purchase Facility at £200bn, to have been unanimous.

Full Report