Home' Trinidad and Tobago Guardian : July 26th 2014 Contents A21
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The UK economy has returned to pre-
crisis levels by expanding 0.8 per cent in
the second quarter of this year.
On an annual basis gross domestic
product (GDP) expanded by 3.1 per cent.
The figures show the economy is now
worth 0.2 per cent more than it was at
its peak in 2008, the Office for National
Statistics (ONS) said.
The service sector is the only part of
the economy that has passed its previous
2008 peak, although that accounts for
almost 80 per cent of UK output. Other
key sectors, including construction,
industrial production and manufacturing,
have yet to outstrip levels reached in
2008. The UK economy is forecast to be
the fastest growing among the G7
developed nations, according to the
International Monetary Fund (IMF).
On Thursday, the IMF predicted the UK
would expand by 3.2 per cent this year,
up from a previous forecast of 2.8 per
cent. Chancellor George Osborne said:
"Thanks to the hard work of the British
people, today we reach a major milestone
in our long-term economic plan." But
shadow chancellor, Ed Balls, said people
were not feeling happier: "With GDP per
head not set to recover for three more
years and [with] most people still seeing
their living standards squeezed, this is no
time for complacent claims that the
economy is fixed."
UK economy back at pre-crisis level
Earl Boodasingh, chairman, Massy Integrated Retail, left, David O'Brien, executive director,
Massy Group; Gervase Warner, president and chief executive officer, Massy Group; Derek
Winford, chief executive officer, Massy Stores, and Thomas Pantin, chairman, Massy Stores, at
a function titled, A Celebration of a New Beginning, to celebrate the rebranding from Hi-Lo to
Massy Stores at the Banquet & Conference Centre, Fiesta Plaza, MovieTowne, Audrey Jeffers
Highway, Port-of-Spain, on Wednesday. PHOTO: ANDRE ALEXANDER
A NEW BEGINNING
More than 80 per cent of firms expect
to increase their production levels in the
next six months.
More firms are confident the local econ-
omy would improve in the next 12 months
than the first Business Confidence Survey
conducted by the Arthur Lok Jack Graduate
School of Business.
Those are two of the highlights of the
Central Bank s monetary policy announce-
ment released yesterday.
Below is the full statement issued by the
With core inflationary pressures well con-
tained, the Central Bank is maintaining the
repo rate at 2.75 per cent, which remains
supportive of current economic conditions.
However, as the pace of economic activity
strengthens, the Central Bank is giving
greater consideration to managing infla-
tionary expectations in calibrating its mon-
etary policy instruments.
As of late July 2014, signals are mixed
regarding the outlook for global growth. In
its latest World Economic Outlook (WEO)
Update, the IMF indicates that the global
recovery continues but at an uneven pace,
and that downside risks remain. In the Unit-
ed States, earlier optimism about growth
prospects has moderated following an unan-
ticipated sharp contraction in the first quar-
ter of 2014, even though a rebound in activity
is already underway.
Growth is improving for some economies
in the Euro zone, while the economic recov-
ery in the United Kingdom appears to be
sustainable. Growth in most emerging mar-
kets, including China, remains at a slower
pace than before, partly due to softer external
Although geopolitical tensions are esca-
lating in several regions around the world,
expectations of changes in monetary policy
in the major industrial economies dominate
sentiment in global financial markets. The
United Kingdom is expected to be the first
advanced economy to raise interest rates,
albeit at a moderate pace, while the US Fed-
eral Reserve is not anticipated to raise interest
rates until later in 2015. By contrast, the
European Central Bank (ECB) recently
announced a package of policy measures to
stimulate bank lending and to address the
risk of a prolonged period of low inflation
in the Euro area.
At home, the corporate sector is still cau-
tiously optimistic in its outlook for business
activity and economic strength.
Results from the Central Bank s second
Business Confidence Survey, conducted in
the second quarter of 2014 in conjunction
with the Arthur Lok Jack Graduate School
of Business, showed that almost 80 per cent
of firms expect to increase their production
levels over the next six months.
More firms were also confident that the
local economy would improve over the next
12 months than in the first survey.
On the other hand, 66 per cent of all
businesses expect their financial position
to improve in the next 12 months, down
from 75 per cent of firms in the first quarter
A recovery in business lending and steady
growth in consumer loans provide support
to the positive business sentiment. On a
year-on-year basis, private sector credit
granted by the consolidated financial system
expanded by more than 6½ per cent in
May 2014 -- the fastest rate since February
Business lending grew for the fourth con-
secutive month, also, by around 6½ per
cent in May 2014, from just over 3 ½ per
cent in April 2014.
Consumer lending remained robust, grow-
ing at around 7½ per cent in May 2014.
Meanwhile, the pace of real estate mortgage
loans slowed to just over 10.0 per cent in
May 2014 from 14½ per cent at the start
of the year.
Core inflation remained relatively stable
in the first half of 2014. On a year-on-year
basis, core inflation stood at 2½ per cent
by the end of June 2014.
Headline inflation slowed to 3.0 per cent
while food inflation eased for the third con-
secutive month to 3½ per cent in June 2014.
Rising consumer demand, higher Gov-
ernment spending and second round effects
from the recent increase in cement prices
could help to accelerate inflationary pressure
later in the year.
Excess liquidity dips
Excess liquidity in the banking system fell
below $5 billion in the first three weeks of
July 2014. Commercial banks excess reserves
dropped to a daily average of around $5.0 bil-
lion over the period July 1-21, 2014 from a
little over $7.5 billion in June and close to
$8.5 billion in May 2014.
In June 2014, the Central Bank issued a
seven-year, 2.2 per cent coupon, liquidity
sterilisation Treasury bond, which removed
approximately $1.0 billion from the financial
system. In addition, central Government s
operations, which are usually the main source
of banking system liquidity, resulted in a net
domestic withdrawal of roughly $1.3 billion
in the first three weeks of July 2014. Further,
Central Bank s support to the foreign exchange
market in July also indirectly withdrew $1.1
billion from the system.
Interest rate differentials between TT and
US Treasury securities, though still low, have
stabilised in positive territory over the past
few months, particularly at shorter tenors.
The three-month domestic Treasury Bill rate
increased marginally to 0.13 per cent in mid-
July 2014 from 0.12 per cent at the end of
With the three-month US Treasury Bill
rate holding at 0.03 per cent, the TT-US
interest differential widened slightly to ten
basis points as at July 21, 2014, from nine
basis points at the end of June 2014.
Meanwhile, despite the ongoing reduction
in the US Federal Reserve s quantitative easing
programme, strong external demand has
placed some downward pressure on longer-
term US Treasury yields in recent months.
As such, the interest rate differential
between TT and US ten-year Treasury yields
remained in positive territory at around 14
basis points as at July 21, 2014, from ten basis
points at the end of June 2014.
The Central Bank will continue to closely
monitor economic conditions and is prepared
to take further action, if necessary. The next
monetary policy announcement is scheduled
for September 26.
Core inflation remains stable
...Central Bank maintains repo rate at 2.75 per cent
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