Inflation Report August 2005

1. Inflation Report August 2005

2. Demand

3. Chart 2.1 Nominal GDP

4. Chart 2.2 Contributions to quarterly growth in consumer spending(a) (a) Chained volume measure. Excluding non-profit institutions serving households. (b) Other spending is on net tourism and non-durable goods.

5. Chart 2.3 Households’ quarterly interest payments and receipts and the repo rate (a) Includes non-profit institutions serving households. (b) Quarterly average. Last data point is 2005 Q2.

6. Chart 2.4 Households’ real post-tax labour income

7. Chart 2.5 GfK consumer confidence: households’ financial situation over the next twelve months Source: Martin Hamblin GfK.

8. Chart 2.6 Real house prices(a) and consumption(b) Sources: Bank of England, Nationwide and ONS. (a) Real house price measure, calculated as the nominal Nationwide series deflated by the consumption expenditure deflator. (b) Chained volume measure of consumption. Excluding non-profit institutions serving households. (c) 2005 Q1 data were unavailable at the time of the May Report.

9. Chart 2.7 Sectoral contributions to quarterly whole-economy investment growth(a) (a) Chained volume measures.

10. Chart 2.8 Official estimates of business investment and a survey-based indicator Sources: Bank of England, ONS and Ellis, C and Barnes, S (2005), ‘Indicators of short-term movements in business investment’, Bank of England Quarterly Bulletin, Spring, pages 30–38. (a) Shaded area shows the survey-based indicator plus and minus its average absolute difference from official estimates between 1996 and 2002.

11. Chart 2.9 Nominal government procurement and public sector employment

12. Chart 2.10 Euro-area competitiveness — real effective exchange rates based on relative unit labour costs Source: Thomson Financial Datastream. (a) Inverted scale. An increase in the index implies a fall in competitiveness.

13. Chart 2.11 Contributions to quarterly US GDP growth(a) Source: US Bureau of Economic Analysis. (a) Chained volume measures.

14. Chart 2.12 Revisions to quarterly UK export growth since 1997

15. Tables

16. Table 2.A Expenditure components of demand(a) Percentage changes on a quarter earlier 2003 2004 2005 AverageAverageQ2Q3Q4Q1Q2 Household consumption(b) 0.6 0.9 1.3 0.6 0.6 0.1 n.a. Government consumption 1.5 0.3 0.3 0.2 0.4 0.7 n.a. Investment -0.2 0.9 1.5 1.5 -0.2 0.3 n.a. of which, business -0.7 0.6 0.8 2.0 -0.4 0.1 n.a. Final domestic demand 0.7 0.8 1.0 0.6 0.4 0.2 n.a. Change in inventories(c)(d) 0.1 -0.1 -0.1 0.1 -0.1 -0.1 n.a. Alignment adjustment(d) 0.0 0.0 0.1 -0.1 0.4 0.1 n.a. Domestic demand 0.8 0.7 1.0 0.6 0.8 0.2 n.a. Exports 1.0 1.2 1.4 0.4 1.1 -0.9 n.a. Imports 1.0 1.4 2.0 1.2 1.7 -1.2 n.a. Net trade(d) 0.0 -0.1 -0.2 -0.3 -0.2 0.1 n.a. Private final expenditure(e) 0.5 1.0 1.3 0.6 0.6 -0.4 n.a. GDP at market prices 0.8 0.7 0.8 0.4 0.6 0.4 0.4 (a) Chained volume measures. (b) Excludes non-profit institutions serving households. (c) Excludes the alignment adjustment. (d) Percentage point contributions to quarterly growth of GDP. (e) Household consumption excluding non-profit institutions serving households, private investment and exports.

17. Table 2.B Indicators of consumer spending 2004 2005 Q2Q3Q4Q1Q2July Percentage changes on a quarter earlier Retail sales volumes 2.0 0.8 0.0 0.1 0.7 n.a. Private vehicle registrations(a) -8.2 -0.7 -1.2 -4.9 0.5 n.a. Percentage changes on a year earlier BRC retail sales values (total) 5.5 4.0 2.6 3.9 1.2 n.a. BRC retail sales values (like-for-like) 2.7 1.5 0.0 0.7 -2.5 n.a. Balance CBI retail sales volumes(b)(c) 41.3 5.7 21.0 -3.3 -13.3 -14.7 Sources: Bank of England, BRC, CBI, ONS and SMMT. (a) Seasonally adjusted by the Bank of England. (b) Balance of respondents in the CBI Distributive Trades survey reporting sales higher than a year earlier. (c) July figure is a three-month moving average.

18. Table 2.C Indicators of future investment(a) Average Average 2004 2005 since in 1989 1997 Q3Q4Q1Q2 Surveys of investment intentions BCC service sector 15 28 17 15 11 8 BCC manufacturing(b) 10 23 18 16 10 9 CBI manufacturing -7 12 -17 -19 -16 -15 CBI distributive trades -1 9 24 6 -18 -29 Confidence in profitability(c) BCC service sector 34 46 35 41 38 29 BCC manufacturing(b) 29 37 24 35 34 34 Sources: BCC and CBI. (a) Percentage balances of respondents. (b) Includes agriculture, energy and construction. (c) The question asks ‘Do you believe that over the next twelve months profitability will improve/remain the same/worsen?’

19. Revisions to the National Accounts

20. Chart A GDP(a) (a) Chained volume measure.

21. Chart B Revisions to the level of GDP (a) Calculated using the difference in cumulated growth from 1991 Q4 before and after the revisions, as volumes levels before and after the revision are not directly comparable. (b) Excluding non-profit institutions serving households.

22. Chart C Household consumption(a) (a) Excluding non-profit institutions serving households. (b) 2005 Q1 data were unavailable at the time of the May Report.

23. Chart D Households’ saving ratio (a) 2005 Q1 data were unavailable at the time of the May Report.

24. Chart E Business investment(a) (a) Chained volume measure. (b) 2005 Q1 data were unavailable at the time of the May Report.

25. Chart F Whole-economy stock-output(a) ratio (a) Inventories (excluding the alignment adjustment) as a proportion of chain-weighted GDP. (b) 2005 Q1 data were unavailable at the time of the May Report.