Inflation Report February 2015

Demand

Chart 2.1 Private domestic financial saving has fallen since 2012; external deficit has widenedNet financial accounts by sector

(a) A recession is defined as at least two consecutive quarters of falling output (at constant market prices) estimated using the latest data. The recession is assumed to end once output begins to rise.

(b) Includes non-profit institutions serving households.(c) Excludes public corporations. The series has been adjusted by Bank staff to exclude the impact of Asset Purchase Facility transfers, which are non seasonally adjusted.

Chart 2.2 The household saving ratio has fallenHousehold saving

(a) Percentage of household post-tax income.(b) Percentage of household post-tax income excluding income flowing into employment-related pension schemes.

Chart 2.3 Fewer housing starts likely to mean lower investment in new homesHouse building and investment in new dwellings

Sources: Department for Communities and Local Government, ONS and Bank calculations.

(a) Chained-volume measure. Excludes improvements to existing dwellings.(b) Number of permanent dwellings financed and built by private developers. Permanent dwelling starts in Wales are assumed to grow in line with Welsh total permanent dwelling starts

since 2011 Q2. UK data for 2014 Q2 and 2014 Q3 have been grown in line with data for England. Data have been seasonally adjusted by Bank staff.

Chart 2.4 Energy-related sectors influenced investment growth heavily in 2011–12Contributions to four-quarter business investment growth(a)(b)

(a) Chained-volume measures. Contributions prior to 2011 are indicative estimates.(b) Figures in parentheses are shares in total business investment in 2011.(c) Total business investment growth less contributions from the mining and quarrying, oil and gas extraction and electricity, gas and water sectors.

Chart 2.5 US household spending and employment growth picked up in Q4US household consumption and non-farm payrolls

Sources: Bureau of Economic Analysis and Bureau of Labor Statistics.

(a) Chained-volume measure.

Chart 2.6 Goods export growth picked up in Q4Exports of goods and survey indicators

Sources: BCC, CBI, Markit/CIPS, ONS and Bank calculations.

(a) Includes measures of manufacturing export orders from BCC, CBI and Markit/CIPS scaled to match the mean and variance of annual goods export growth since 2000. BCC data are non seasonally adjusted.

(b) Excludes the estimated impact of MTIC fraud. Includes oil and erratics.

Chart 2.7 The UK current account deficit equalled its record high in Q3UK current account

(a) Includes compensation of employees.

Chart 2.8 Net investment income has weighed on national gross disposable income growthContributions to four-quarter growth in a measure of gross national disposable income

(a) Real GDP less nominal GDP deflated by the final consumption expenditure deflator.(b) Chained-volume measure at market prices.(c) Includes net investment income and current transfers. Deflated by the final consumption expenditure deflator.

Tables

Table 2.A Monitoring the MPC’s key judgements

Table 2.B Household consumption growth robust in Q3; private sector investment fellExpenditure components of demand(a)

(a) Chained-volume measures unless otherwise stated.(b) Includes non-profit institutions serving households.(c) Investment data take account of the transfer of nuclear reactors from the public corporation sector to central government in 2005 Q2.(d) Excludes the alignment adjustment.(e) Percentage point contributions to quarterly growth of real GDP.(f) Excluding the impact of missing trader intra-community (MTIC) fraud. Official MTIC-adjusted data are not available for exports, so the headline exports data have been adjusted by Bank

staff for MTIC fraud by an amount equal to the ONS import adjustment.

Table 2.C Real labour income growth has kept pace with the rise in consumption in 2014Consumption and income

(a) Chained-volume measures. Includes non-profit institutions serving households. Components may not sum to total due to chain-linking.(b) Percentage point contribution to total consumption growth. Figures in parentheses are shares in total consumption spending in 2011.(c) Includes spending on non-durable goods and consumer services, spending by non-profit institutions serving households and net tourism.(d) Includes semi-durables.(e) Total available household resources divided by the consumer expenditure deflator.(f) Wages and salaries plus mixed income less taxes plus net transfers, deflated by the consumer expenditure deflator.

Table 2.D UK-weighted world GDP growth was broadly steady in Q3GDP in selected countries and regions(a)

Sources: Eurostat, IMF World Economic Outlook (WEO) Update January 2015, Japanese Cabinet Office, National Bureau of Statistics of China, OECD, ONS, Thomson Reuters Datastream, US Bureau of Economic Analysis and Bank calculations.

(a) Real GDP measures. Figures in parentheses are shares in UK exports in 2013 from the 2014 Pink Book.(b) The earliest observation for China is 2000 Q1. Data are non seasonally adjusted.(c) Constructed using data for the real GDP growth rates of 147 countries weighted according to their shares in UK exports. The observation for 2014 Q3 is an estimate. Where national accounts data for 2014 Q3 are not yet available, data are assumed to be consistent with projections in the IMF WEO Update January 2015.

Table 2.E Euro-area activity remained subdued; inflation weakened furtherEuro-area indicators

Sources: European Commission and Eurostat.

(a) Per cent. Chained-volume measure.(b) Figures from 2014 Q1 onwards are quarterly averages of monthly data.(c) European Commission seasonally adjusted measure.(d) Data are non seasonally adjusted. Core HICP excludes food, energy, alcoholic beverages and tobacco. Data point for January 2015 is a flash estimate.