This chart is in data just published for August by the Bank of England:
Bank lending to businesses is now negative i.e. in aggregate businesses are repaying loans now. How that is the basis for an economic recovery defeats me.
At the same time savings look like this:
They are still running at way above pandemic levels. So much for the coiled spring uncurling. Average interest rates are also at their lowest levels.
That people are saving is also reflected in the consumer credit data:
People are only just borrowing again, and at much lower than pre-pandemic levels.
The only thing that has grown is mortgages:
But that peak looks to be well and truly over.
Nothing in any of this data makes it look like there is an economic recovery going on.
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The SME data doesn’t worry me – after such a COVID splurge we should expect some decline. I DO worry about the large company data. If our major businesses can’t find anything worth doing with such cheap borrowed money it is a damning indictment of our economic prospects.
The savings and consumer credit data seem to strongly support the idea that people have “looked into the economic abyss” and it scared them…. so they are building precautionary savings if they can.
The Haldane coiled spring might apply to him and his friends but out in the real world it just ain’t like that. For Haldane to be right we should be seeing the savings at zero…. and it is not.
Agreed, including re SMEs. They had to repay given the sums borrowed.
Haldane was wrong, I think we can safely say
Ever since the crash we have been bouncing along the bottom of a depression, investors don’t invest when markets decline, even die hard marketeers understand that.
MMT have been absolutely clear, if the private sector doesn’t spend into the economy, then the only alternative is for the public sector to take up the slack. If it doesn’t, then we go into recession or at the very least the economy stagnates.
Your faith in facts, Richard, seems very out of date. It’s also the short route to clinical depression, a crime for which you should receive your just desserts, surely? You are asking us all to believe that the Bank of England, the Chancellor and the entire establishment elite are lying their heads off. Mind you, the government is saying that the fuel crisis is under control, while mobilising the army. AND the totally irresponsible press is reporting huge traffic jams and disruption from filling station queues. So it is just about possible that the odd person has their head in the sand over the entire economy as well. Not likely, of course, but just about plausible. Personally, my faith in the United Kingdom remains at the same level as when it was called Great Britain (last week) and of course I understand the collapse of the pound is either misinformation or johnny foreigner playing silly buggers. And anyway, the economy and markets are just like the weather. You can’t do nuffin about it, so stop wingeing.
One problem on the horizon: energy prices. At the moment nat gas is at circa Euro60/MWh. Nov 2021 contracts (UK) are pricing in at circa Euro100/MWh. This compares to circa Euro30ish earlier in the year. Discussions with gas people yesterday indicate that the worst is yet to come. This may drive inflation, what it may also do is cause widespread social unrest as gas bills move from circa £800/year +/- to £1600 or more. This will have a big impact on industry – as well. It is worth remembering that oil price rises drove inflation in the 1970s – which was partly responsible for bringing down a Labour gov.
Can I ask, what is the retail gas price (expressed in EUR/MWh)? Comparing retail and wholesale energy prices is made very confusing by using “average bills” as a measure. This might give us some guess about how elastic retail gas prices might be to wholesale prices.
I think it is often assumed that a doubling of wholesale prices should lead to a doubling of retail prices….. but if the profit margin is to remain fixed (in money terms… as regulators should demand) that should not be the case.
So, if it was 30/50 (wholesale/retail) earlier this year we should go to 100/120 (or a retail price rise of 140%), If it was 30/100 then it should be 100/170 (a rise of 70%).
Just interested to know….
With respect to retail gas & elec we need to think in terms of “cost stacks” – composed of a range of charges. In the case of elec, the cost stack has around 7 layers and the elec energy element is typically less than 20%. By contract, the gas cost stack has far fewer elements – gas in the Uk used to be circa 4p/kWh when gas wholesale prices were circa 2p/kWh – if gas is circa gulp 8.5pence/kWh does that mean you pay 🙂 16p/kWh – probably not. But it might be in the range 8 to 10.
Discussions with a gas lobby group yesterday, apparently the worst is yet to come. Sorry about that.