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Bank of England Monetary Policy Committee meeting reports:  At its meeting this week, the Monetary policy Committee (MPC) voted unanimously to keep the Bank Rate at +0.1% and to keep its stock of corporate bond purchases at £20 billion.  It also voted 7-1 to continue its programme of purchasing UK government bonds with the target for these purchases remaining at £875 billion - this programme is currently expected to continue until the end of this year.  The alternative scenario here, favoured by one member of the MPC, was to stop the policy of purchasing bonds quickly and limit the purchases to £830 billion.

The headlines from the MPC point to the vaccination programme helping consumer spending, jobs and incomes to recover, although there is the slightly odd factor that while unemployment is falling, the number of people in work is still lower than it was before the pandemic.  The MPC noted that inflation has risen above their target (but not outside the range, at least so far) and they expect it to increase further although only temporarily as the growth in demand is expected to ease once the initial bounce has been worked through.

The report to the MPC from the Bank of England’s agents showed that manufacturing output is being supported by strong demand from food & drink and construction related products;  however, activity growth is being constrained by shortages of materials and labour, with the automotive sector particularly affected by the shortage of semi-conductors.

Contacts reported that they are adapting to the new trading arrangements with the EU and while export demand has increased there is evidence of EU customers rotating away from UK suppliers.  Balancing this, there are also some signs of substitution away from EU imports.

Contacts in some sectors reported seeing investment projects resuming, particularly where demand is exceeding supply.  This was supported by reports of spending on automation where labour shortages are most acute and labour costs were rising more quickly.

You can access the MPC report (which includes limited reporting of the new Bank of England forecasts) and view the press conference from the Bank of England’s web-site at

European GDP, 2nd Quarter 2021:  Eurostat has issued its first look at the GDP data for the 2nd quarter of the year - this shows an increase of +2.0% compared to the 1st period of the year for the Euro-zone and +1.9% for the EU as a whole.  As this follows a decline in GDP in both the two previous quarters, it brings to an end the 2nd stage of the double-dip recession for the two areas.

Compared to a year ago, GDP has increased by +13.7% in the Euro-zone and by +13.2% for the EU;  of course, these are somewhat meaningless numbers because the 2nd quarter of 2020 saw the most severe impact from the Covid-19 outbreak.  This apparently strong growth comes as a result of the bounce in GDP in the 3rd quarter of 2020.

We only have the GDP figures for a few countries and, by a statistical quirk, although the region as a whole had a double-dip recession, only Austria shared that fate.  Some countries, including France and Italy, saw a fall in GDP in the final period of 2020 but managed a small positive number in Q1-21, while others (including Germany) were growing in Q4-20 but contracted in the 1st period of this year.  All 11 of the Member States who have published figures for the 2nd quarter saw growth in GDP compared to the previous quarter, led by Portugal (+4.9%) and Austria (+4.3%).

The Eurostat News Release can be downloaded from their website at (30 July) or requested from MTA.