Economic Highlights

The full extent of the recession was revealed in all its gory detail, with GDP falling 20.4% m/m in April. Construction (-40.1%) and Manufacturing (-24.3%) led the falls. Despite evidence of high interest in the re-opening housing market, the latest RICS survey of expectations for house prices fell from -22% to -32%. The Bank of England meets this week, and there is expectation that it will expand its asset purchase programme.

Core CPI drifted lower again in May, and now stands at just 1.2%. There is not much impetus for a recovery in inflation soon, and so the Fed will retain its aggressively loose monetary policy stance for a while yet. Weekly Jobless Claims fell again to 1.54m from 1.9m, with Continuing Claims standing at 21.3, down from a peak of 24.9m. The bottom is definitely in, but the pace of recovery remains uncertain.

We still await the formal approval of the EU’s €750 billion stimulus programme. Individual countries are doing their own thing. For example, France will extend its jobs support scheme for two years of required. It currently covers 8.6 million workers. (The US’s expires in July, and the UK’s in October, at least on current plans).

Industrial Production is actually up on a year ago now, rising 4.4%. Retail Sales, though, remain lower, running at -2.8%. It is easier for the government to kick-start manufacturing and infrastructure projects, but a lot more difficult to force people to get out and spend money. Unemployment, at 5.9%, is too high for comfort for the government, which will continue to stimulate the economy tostimulate the economy to decrease any risks of social unrest.