Trading Economics
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Content
Acknowledgements ix
Introduction xi
Surprise Indices xii
Mapping a New Landscape xix
1 Surveys 1
Surveys and Behavioural Economics 2
Types of Survey 3
Business Surveys 3
Consumer Surveys 21
Conclusion 28
2 Economic Growth 31
Economic Growth Through the Ages 31
GDP 34
What Is GDP? 39
Breaking Down GDP 42
Why Is GDP Important? How Is It Measured? 43
Index Numbers of GDP and the Price Deflators
Used in Calculating Them 45
Detailed Breakdown of the GDP Measures 48
AMarket Link 61
Components of GDP 62
Conclusion 64
3 Labour Markets 65
Employment Trends 66
What Has Driven the Change? 70
Consequences for Economic Growth 72
Phillips Curve Shows no Durable Trade-Off Exists 74
NAIRU Matters More 75
Employment Measures 76
Why We Measure Unemployment 77
The Nature of Unemployment 79
The Impact of Demographics on Labour Markets 81
Vacancies 90
Changing Labour Patterns 92
The UK in Comparison to Its Global Competitors 96
How Do We Extract Value from This? 96
Conclusion 98
4 Inflation 99
What Is Inflation? 99
The History of Inflation 99
Causes of Inflation 101
Earnings/Wage Inflation 109
Price Basket 110
How Is Price Inflation Measured? 110
GDP Deflator 111
Why so Many Measures of Inflation? 112
A Focus on the CPI and RPI 118
Why Is Inflation Important? 122
Deflation 123
Other Measures of Inflation Targeting 123
How Can We Extract Value from This? 125
Conclusion 125
5 Monetary Statistics 127
Monetary Policy and Inflation Management 130
The UK in a Global Context 133
Central Bank's Role 133
What About the Bank of England? 135
How Monetary Policy Works in the UK 136
Decomposition of Money 144
Why Does Money Supply Matter? 149
Why Is This Sort of Analysis Useful? 155
A Brief History of Monetary Targeting 155
How Do We Extract Value from This? 158
Conclusion 158
6 Fiscal Indicators 161
A Brief History of UK Fiscal Policy 163
Measuring Government Debt 164
Fiscal Policy Impact and Terminology 166
The Impact of Government on Markets 168
Fiscal Policy and Growth 168
The Data We Should Consider 169
Fiscal Policy in Boom and Bust 170
Market Relevance 173
Bank of England Regains Regulatory Powers 176
What Role Does the Office for Budget Responsibility Play in the Fiscal Policy Process? 180
The Monetary Policy Committee 181
Forward Guidance - Another Bank Innovation 183
The Debt Management Office's Role 185
Comparison of International Debt 188
Fiscal Targets Add Credibility to Debt Reduction 190
How Can We Extract Value from This? 192
Conclusion 193
7 Global Trade Statistics 195
What Is a Country's Balance of Payments? 197
Why Do We Measure the Balance of Payments? 197
What Does It Mean? 198
The Concept of the Balance of Payments 199
UK Is Not Alone in Having a Trade Deficit 204
A Chronic Goods Deficit 208
A Chronic Services Surplus to Offset (Almost) the Trade Deficit 210
The Ever-Changing Pattern of Visible and Invisible Trade 213
Balance of Payments and GDP 222
Shifting Trade Patterns 222
How Can We Extract Value from This? 224
Conclusion 225
Conclusion 227
Appendices
Appendix 1 Surveys 235
Appendix 2 Bank of England: Agents' Summary of Business Conditions (January 2014) 241
Appendix 3 Inflation: Contributions to Change in the 12-Month Rate 247
Appendix 4 Voting on Interest Rates by the Monetary Policy Committee - 1997 to January 2014 249
Appendix 5 Voting on Asset Purchases Financed with central bank reserves by the Monetary Policy Committee - March 2009 to January 2014 251
Bibliography 253
Index 255
