MOOTICITY

  The scores on the doors for April GDP reading. A lower than expected 0.3% month on month decline would have shocked a few forecasters which according to the consensus were expecting at least 0.1% monthly growth in April. The main driver of the drop in GDP was a 0.3% monthly drop in services following a 5.6% decrease in health and social work due to significant reduction in NHS Test and Trace activity that detracted 0.5 percentage points from GDP growth in April.  It is worth noting monthly measurements are based on Gross Value Added (‘GVA’) figures which use the chain method to calculate output growth based on sales as a proxy for output. In the case of the Index of Services component the data is compiled and weighted according to the following:  Office for National Statistics (ONS) Monthly Business Survey (44.4%) ONS Retail Sales Inquiry (6.4%) ONS Government Expenditure (20.1%) ONS Households’ Expenditure (15.3%) ONS Finance Expenditure (7.8%) Other (5.9%).  Henc...

  As the Bank of England continues to raise interest rates in order to bring inflation back down to their 2% target. I thought it would be a good idea to discuss the business lending market and if rising rates or inflation matter.  Forecasting business lending growth rates is tricky business. There are no clear correlations between business lending growth and obvious variables such as GDP, Inflation, Unemployment, or last but not least interest rates. While they all play a factor, I have found that business lending is determined largely by business strategy. Business lending forecasting at best is an attempt to accumulate several microeconomic formulas which in turn result in often counterintuitive macroeconomic results. The reasons why I believe this is the case are the following.  Fragmentation between SME and PNFC lending conditions Shocks and solutions to supply chain disruptions vary across industries Government support/intervention for SMEs is different to PNFCs Fir...