Recovery Fades in UK; UK Trade Deficit Hits Record; US Trade Deficit Shrinks; Jobless Claims Drop or Not?

The recovery in the UK has faded, with manufacturing, housing, and services all weakening in August. In response the BOE Mulls ‘Second Wave’ of Stimulus

Bank of England Governor Mervyn King may have to embark on a new round of bond purchases as Britain’s rebound from the worst recession since World War II fades.

Manufacturing, services and construction all faltered in August and the housing market weakened, surveys showed last week. That suggests 200 billion pounds ($309 billion) in bond purchases by the central bank since March 2009 and record-low interest rates may not be enough to keep up the economy’s momentum in the deepest budget squeeze in more than six decades.

“They are more likely to loosen policy further before they tighten it,” Alan Clarke, an economist at BNP Paribas in London, said in a telephone interview. “The danger is acting too late and not soon enough.”

BNP economist Clarke says Bank of England officials could probably justify further bond purchases using their new forecasts, though the current strength of price pressures makes it less palatable for them as they seek to preserve their inflation-fighting credentials.

“Clearly they are concerned that loosening in an environment where the latest GDP figure is 1.2 percent and the latest inflation figure is above 3 percent would undermine their credibility,” he said. “That’s the trap they’re in.”

Quantitative easing did nothing for the US, nothing for Japan, and nothing for the UK (at least for the real economy). Yet central bankers seem committed to the strategy.

UK Trade Deficit Hits Record

Economists in the UK were disappointed to see U.K. Trade Deficit Widens to Record

The U.K.’s trade deficit widened to a record in July as purchases of chemicals and oil drove imports to the highest level in two years.

The goods-trade gap widened to 8.7 billion pounds ($13.4 billion) from 7.5 billion pounds and June, the Office for National Statistics said today in London