London’s Economic Outlook:
March 2013
Gordon Douglass
GLA Economics
Overview
•
The general macroeconomic situation
•
•
•
•
Economic indicators suggest London is
performing slightly better than the UK
UK economy faces a tough start to 2013
A still worrying economic environment in the
Eurozone and political wrangling in the US
GLA Economics latest forecast for
London’s economy
UK contracted in Q4 2012 and virtually
flat in 2012
Last data point: Q4 2012
Source: ONS
London’s economy is growing slowly
Last data point: Q3 2012
Source: Experian Economics
London’s annual employment growth
higher than in the UK
Last data point: Q3 2012
Source: Experian Economics
London’s unemployment rate is down
from its peak
Last data point: Oct-Dec2012
Source: ONS
Claimant Count Unemployment
Last data point: January 2013
Source: NOMIS
Strong underground passenger growth
Last data point is the 28-day period ending 5 January 2013
Source: Transport for London
Annual house price inflation is higher in
London than in the UK
Last data point: Q4 2012
Source: ONS
Surveyors reporting house prices in London
are increasing whilst falling in England & Wales
Last data point: January 2013
Source: Royal Institution of Chartered Surveyors
Consumer confidence is negative but
holding up better in London
Last data point: February 2013
Source: GfK
PMI survey suggests London is growing
Last data point: January 2013
Source: Markit Economics
Service businesses believe that their profitability
will improve in the next 12 months…..
Last data point: Q4 2012
Source: British Chambers of Commerce
and so will their turnover
Last data point: Q4 2012
Source: British Chambers of Commerce
US economy virtually flat in Q4 2012 but nonmanufacturing US businesses is more positive
Last data point: February 2013
Source: Institute for Supply Management
Eurozone GDP growth in selected countries
(% change compared with previous quarter)
Last data point: Q4 2012
Source: Eurostat
Sterling has depreciated recently against
the Euro
Last data point: 5/03/2013
Source: Bank of England
Forecasts for the UK economy
• The IMF forecast in January that it expects the UK
to grow by 1.0% in 2013 and by 1.9% in 2014.
• HM Treasury Comparison of Independent
Forecasts: As at February 2013, the average of
independent forecasts was for growth of 0.9% in
2013 and 1.6% growth for 2014.
• The OECD’s latest forecast published in December
expected a contraction of -0.1% in 2012, growth of
0.9% in 2013 and 1.6% in 2014.
GLA Economics’ forecast for output growth in
London (% change) – November 2012
Source: GLA Economics – LEO (Nov 2012) / Experian Economics
Note: External forecasters are Cambridge Econometrics, Experian Economics, CEBR and Oxford Economics
GLA Economics’ forecast for employment
growth in London (% change)
Source: GLA Economics – LEO (Nov 2012) / Experian Economics
Note: External forecasters are Cambridge Econometrics, Experian Economics, CEBR and Oxford Economics
Sector forecasts (1)
(% change)
4
GVA
3
Financial Services
2
1
Employment
0
-1
2012
2013
2014
5
GVA
4
Employment
3
2
Business Services
1
0
2012
Source: GLA Economics – LEO (Nov 2012)
2013
2014
Sector Forecasts (2)
(% change)
4
GVA
Financial & business services
3
Employment
2
1
0
2012
2013
2014
4
GVA
3
2
Transportation
& storage
1
Employment
0
2012
Source: GLA Economics – LEO (Nov 2012)
2013
2014
Sector forecasts (3)
(% change)
4
Employment
Distribution, accommodation and food services
activities
3
GVA
2
1
0
2012
2013
2014
1
0
-1
GVA
Other (public &
private) services
Employment
-2
2012
Source: GLA Economics – LEO (Nov 2012)
2013
2014
Sector forecasts (4)
(% change)
3
GVA
2
Manufacturing
1
0
-1
-2
-3
Employment
2012
2013
2014
3
GVA
2
1
Employment
0
Construction
-1
-2
2012
Source: GLA Economics – LEO (Nov 2012)
2013
2014
Downside risks to the forecast
• Eurozone sovereign debt crisis flares up again
• Eurozone goes into a deeper recession hitting
London exports
• The US economy falters due to political
wrangling
• Lending to households and firms remains
constrained for the foreseeable future though
there are positive signs especially in the
housing market due to the Funding for Lending
Scheme (FLS)
To conclude
• London continues its bumpy recovery
• The deleveraging aftermath of the financial crisis
recession continues to dampen growth
• In general forecasters expect London to grow slightly
quicker than the UK
• The large depreciation of sterling and monetary
easing should continue to provide support to the
economy. Although fiscal retrenchment may act as a
drag on growth it has put downward pressure on
interest rates and is a required part of the necessary
rebalancing of the UK economy
 Thank you
Gordon Douglass
 gordon.douglass@london.gov.uk