Year-end 2011 - US, UK, and European Economies

Created on Thursday, 19 January 2012 22:48

Summary of the Key highlights/KPIs of the US, UK, and European economies over 2011

US – Key highlights

  • Economic recovery continued during 2011 (although, at a slower pace than during 2010).
  • Revisions to data communicated throughout the year meant that it was not until Q3 that nominal GDP exceed pre 2008-09 recession levels.
  • 4-week average for jobless claims currently below 375,000 - its lowest level since mid-2008.
  • December ISM Manufacturing Purchasing Managers’ survey at a 6-month high of 53.9.
  • University of Michigan consumer confidence measure at a 6-month high and the Conference Board measure at an eight-month high in December.
  • December 13th, FOMC noted that “indicators point to some improvement in overall labour market conditions” and “Household spending has continued to advance, but business fixed investment appears to be increasing less rapidly”.
  • FOMC continues to anticipate that it will maintain the Federal Funds target at its current 0-0.25% level until at least the middle of 2013.


UK – Key highlights

  • Anticipated increase of UK economy of 0.9% during 2011, however inflated due to reversal of weather-affected Q4 2010.
  • Consumer confidence per GfK NOP survey at -33 in December, the lowest level since early 2009. It has only been lower on two occasions – a single month in 1990, and eight months during the 2008-2009 recession.
  • Largest fall within the index was in the measure for the General Economic Situation over the next 12 months.
  • Unemployment, per by the ILO method, at 8.3%, the highest for fifteen years.
  • Manufacturing survey still remains below the critical 50 level.
  • Inflation appears to have peaked in the UK, with the year-onyear rate in November standing at 4.8%, compared to September’s peak of 5.2%.
  • December MPC meeting noted that “inflation is more likely to be below than above the 2% target at the forecast horizon”.


Europe – Key highlights

  • ECB brought interest rate back down to the 1% level by the end of 2011.
  • In addition, 2 three year long-term refinancing operations were announced, the first of which generated a substantial response with the ECB allocating €489 billion to 523 banks.
  • The aim of these operations seems to be to encourage banks to lend more to the private sector, and to buy the sovereign debt of the more distressed Euro-zone countries.
  • The Euro-zone economy is now expected to fall back into recession, with contractions during both Q4 2011 and Q1 2012.
  • ECB in December gave an anticipated range for GDP growth in 2012 between -0.4% and 1% and for 2013 between 0.3% and 2.3%, and stated that there is “substantial downside risks to the economic outlook for the euro area exist in an environment of high uncertainty”.
  • December Manufacturing, Services and Composite indices all remain below the critical 50 level, although some small increases to the Euro-zone Purchasing Managers’ Surveys.
  • End of year economic and consumer confidence at lowest levels for over two years and unemployment level remains at 10.3%, the highest level since 1998.
  • Uncertainty and scepticism over the new measures proposed to deal with the latest economic position expected to generated volatility within the financial markets.

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