The Bank of England Monetary Policy Committee has reported this morning. It has said:
The spread of Covid-19 and the measures to contain it are having a significant impact on the United Kingdom and many countries around the world. Activity has fallen sharply since the beginning of the year and unemployment has risen markedly.
Economic data have continued to be consistent with a sudden and very marked drop in global activity. Oil prices have been volatile. There have, however, been tentative signs of recovery in domestic spending in China, and this is likely to be echoed in other countries that have started to relax Covid-related restrictions on economic activity. Financial markets have recovered somewhat over recent weeks and risky asset prices have picked up from their lows in mid-March. This in part reflects the actions taken by authorities in the United Kingdom and elsewhere. Global financial conditions have, nevertheless, remained tighter than prior to the outbreak of Covid-19.
The timeliest indicators of UK demand have generally stabilised at very low levels in recent weeks, after unprecedented falls during late March and early April. Payments data point to a reduction in the level of household consumption of around 30%. Consumer confidence has declined markedly and housing market activity has practically ceased. According to the Bank's Decision Maker Panel, companies' sales are expected to be around 45% lower than normal in 2020 Q2 and business investment 50% lower. There has been widespread take-up of the Coronavirus Job Retention Scheme. Nevertheless, sharp increases in benefit claims are consistent with a pronounced rise in the unemployment rate.
CPI inflation declined to 1.5% in March and is likely to fall below 1% in the next few months, in large part reflecting developments in energy prices.
The unprecedented situation means that the outlook for the UK and global economies is unusually uncertain. It will depend critically on the evolution of the pandemic, and how governments, households and businesses respond to it.
I have highlighted two key paragraphs, and will be looking next at the scenario plan the BoE has published, which I have not had time to do as yet.
I do, however, have three immediate reactions. One is that it is apparent that the Bank of England thinks there is going to be rapid release of lockdown and is supporting a policy that says that this will result in rapid economic recovery, despite income being 30% down this quarter. This is apparent from this further comment:
Given the assumed path for the relaxation of social distancing measures, the fall in GDP should be temporary and activity should pick up relatively rapidly.
I think the Bank knows that the government is planning to go for rapid release of lockdown for the reasons I have speculated on this morning. This is, in fact, now policy.
But they know that, as I suggested, that the big problem with that plan is that people will not believe it, so they add:
Nonetheless, because a degree of precautionary behaviour by households and businesses is assumed to persist, the economy takes some time to recover towards its previous path.
I am sure that is true. It's also called the Bank hedging its best, and wisely so.
But the biggest indicator of the fact that this is planned is that despite the havoc within the economy the Bank has suggested that no new measures to support the economy are required, even though the latest £200 billion of quantitative easing has been spent.
What is really going on?
That's anyone's guess right now. But my suspicions are now very definitely raised.
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It sounds to me that the rich have won again – they are protecting their income streams and expecting the rest of us flotsam and jetsam to die for it. Profit rules. Read about what happened in Flint, Michigan when the new water supply was built for the town.
Added to that, the Government knows that the sooner the appearance of normality, the sooner people might forget about their dilatory performance over Covid.
Also, having been late to react to Covid, Johnson does not want to be late to react to any pick up on the international trading scene that will might make BREXIT easier – ready or not Covid wise.
Hmmmm…. “the Government knows that the sooner the appearance of normality, the sooner people might forget about their dilatory performance over Covid. ”
Sadly, I think it entirely possible that Johnson’s Tory cabinet really are that dumb and/or victims of their own propaganda-cum-wishful thinking. Unicorns again! For the reality of any rapid release of the lockdown – in the continued absence of a real, adequately and appropriately staffed, testing and tracing regime followed by mandatory isolation – will be a second wave disaster. Any cheerful celebration, from which the gremlins of No.10 may hope to profit, will be rapidly stilled by the subsequent funerals and surely, drowned in the consequent rage at their utter disregard for the lives of their peoples.
I note that while there are serious scientific opinions that across the ‘U’ K 50,000 track and tracers would be needed, the current plans (?vague promises?) envisage the recruitment of only 18,000 of whom only 3,000 would be non-call centre staff. At the same time Gove anticipates recruiting a real 50,000 – but only for the mountains of post 31st December customs clearing which their insane Breximania is still set to bring us.
Can this get worse?
Not much…