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UK Economy in the Global Crisis – Recovery in Sight? Mark Berrisford-Smith HSBC Bank plc.

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Presentation on theme: "UK Economy in the Global Crisis – Recovery in Sight? Mark Berrisford-Smith HSBC Bank plc."— Presentation transcript:

1 UK Economy in the Global Crisis – Recovery in Sight? Mark Berrisford-Smith HSBC Bank plc

2 Desperately seeking solutions forecastforecast Source: Bank of England, US Federal Reserve, ECB, HSBC HSBCHSBC Policy interest rates: Bank of England US Federal Reserve European Central Bank

3 A world in recession …

4 From credit crunch to global recession This has been the worst episode for the global economy since the 1930s

5 The end of the golden years World Source: IMF, HSBC Annual GDP growth *excluding Japan

6 Asias superpowers falter Asia (excluding Japan) Source: IMF, HSBC Annual GDP growth

7 From credit crunch to global recession This has been the worst episode for the global economy since the 1930s Industrial production and international trade have collapsed

8 Falling off a cliff Source: Thomson Datastream Industrial production annual percentage change

9 A slump in international trade Source: WTO annual percentage change

10 Japans exports are down by nearly a half Source: Thomson Datastream Japan: value of trade in goods annual percentage change Imports Exports

11 From credit crunch to global recession This has been the worst episode for the global economy since the 1930s Industrial production and international trade have collapsed The prospects for recovery hinge on America and China

12 Around six million jobs lost Source: BLS, BEA * Non-farm payrolls, average monthly change

13 The US housing market – state of collapse Source: Thomson Datastream

14 Waiting for the Obama stimulus HSBC forecast Source: BEA, HSBC USA: annual GDP growth Long-term average

15 Surveys point to slower decline expansion contraction Source: Markit PMI surveys:

16 The Euro Area – feet of clay Euro Area Source: Eurostat, HSBC Annual GDP growth

17 Britain: from age of prosperity to age of austerity

18 The worst is over Business surveys suggest that economic activity is now contracting at a much slower pace

19 Business surveys – glimmers of hope expansion contraction Source: Markit PMI surveys:

20 The worst is over Business surveys suggest that economic activity is now contracting at a much slower pace Consumer spending isnt quite the disaster that many predicted

21 Consumer spending – not quite a disaster Source: ONS, Thomson Datastream

22 The worst is over Business surveys suggest that economic activity is now contracting at a much slower pace Consumer spending isnt quite the disaster that many had predicted But unemployment has further to rise, and house prices further to fall

23 The labour market – turning nasty Source: ONS

24 House prices – further to fall Source: Bank of England, Halifax

25 Strong medicine Bank Rate will be kept close to zero until well into next year

26 Inflation – yesterdays story? Source: ONS

27 What to do when interest rates approach zero HSBC forecast Source: Bank of England, ONS Inflation target

28 Strong medicine Bank Rate will be kept close to zero until well into next year The MPC believes that the risks from doing too much are less than the risks from doing too little

29 £125 billion of QE Source: Bank of England, ONS * Notes and coins in circulation, plus commercial banks sterling reserves held at the Bank of England £125bn

30 The credit crunch – starting to ease Source: Bank of England Lending to households Lending to businesses Annualized growth in outstanding lending

31 Narrowing the spreads Source: Thomson Datastream * Merrill Lynch UK corporate bonds index ** UK benchmark 10-yr govt bonds Corporate bond yields* Gilt yields** 3-month Libor UK Bank Rate

32 Strong medicine Bank Rate will be kept close to zero until well into next year The MPC believes that the risks from doing too much are less than the risks from doing too little Sterling has weakened, which is helping to boost the UKs competitiveness

33 Sterling takes a pounding Source: Thomson Datastream; HSBC Sterling weaker US dollar / £ (L axis) euro / £ (R axis) HSBC forecast

34 The age of austerity The recession will soon end, but the recovery will be long and fragile

35 A deep recession HSBC forecast Source: ONS UK: annual GDP growth Long-term average

36 The age of austerity The recession will soon end, but the recovery will be long and fragile Without radical action it could take the best part of 20 years before the public finances are back to normal

37 Breaking the elastic Sustainable Investment Rule Source: ONS, HM Treasury HM Treasury forecasts (Budget Report 2009)

38 The age of austerity The recession will soon end, but the recovery will be long and fragile Without radical action, it could take the best part of 20 years to return the public finances to normal Credit is likely to remain somewhat restricted into the medium term

39 Mind the gap! Source: Bank of England Financial Stability Report October 2008 * Customer lending less customer funding, where customer refers to all non-bank borrowers and depositors

40 Closing the gap Growth rates required to restore customer funding gap to 2003 levels… … in three years … in one year Source: Bank of England Financial Stability Report October 2008

41 A historical perspective first oil shock second oil shock yuppie flu dotcom bust subprime contagion Source: ONS, HSBC The Great Depression

42 ABC


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