Inflation makes a comeback COFACE UK Country Risk Conference

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Inflation makes a comebackCOFACE UK Country
Risk Conference

• Mark Berrisford-Smith
• HSBC Bank plc

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The end of an era
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Inflation 3.1 and suddenly economics gets
interesting!
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Starting to misbehave
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The end of goods deflation
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Consumers feel the heat

• Disposable incomes are being depressed by higher
  taxes and a weaker labour market

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A weaker labour market
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Highest for 25 years
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Consumers feel the heat

• Disposable incomes are being depressed by higher
  taxes and a weaker labour market
• Spending power has been sustained by extra
  borrowing

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The rising tide of debt
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Signs of stress
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Carry on, shopping
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The next downturn is just around the corner

• Interest rates could rise more than once

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The MPC nervous times!
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The next downturn is just around the corner

• Interest rates could rise more than once
• The economys biggest engines will start to
  falter

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Signs of cooling
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Unfamiliar territory
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Not quite such a big spender
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The next downturn is just around the corner

• Interest rates could rise more than once
• The economys biggest engines will start to
  falter
• Growth will slow to 2 next year

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Serial downturns
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The environment for business
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Tougher times ahead

• Companies have enjoyed a profits boom

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Resilient profits
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Retailers price balances
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Manufacturers price balances
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Tougher times ahead

• Companies have enjoyed a profits boom
• Yet more businesses are failing

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Not like the early 1990s
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Tougher times ahead

• Companies have enjoyed a profits boom
• Yet more businesses are failing
• Those involved in retailing and commercial
  property will be vulnerable

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A lesson from the past
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Commercial property yields
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Tougher times ahead

• Companies have enjoyed a profits boom
• Yet more businesses are failing
• Those involved in retailing and commercial
  property will be vulnerable
• There is unlikely to be much respite for
  exporters

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Slow boats to China
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