PRESS DIGEST - Financial Times - March 14

Financial Times

INFLATION EXPECTATIONS AT RECORD HIGH

The Bank of England's quarterly survey of attitudes to inflation reveals expectations of future inflation have reached the highest level on record. The survey found people on average thought prices would rise 3.3 percent over the next year and that prices had risen by 3.9 percent in the past year. Nearly a third of those surveyed thought inflation was currently over 5 percent and over 20 percent think it will exceed that level over the coming year. In January consumer price inflation was actually at 2.2 percent and is expected to peak at three percent this summer.

DARLING IS "IN A FISCAL STRAITJACKET"

The Institute for Fiscal Studies said on Thursday the Budget has revealed an underlying deterioration of 7.5 billion pounds in the public finances. The IFS said Alistair Darling now has no room for manoeuvre without breaching the government's self-imposed fiscal rules. The IFS calculates the Chancellor of the Exchequer had a 2.8 billion pounds leeway against the fiscal rules in 2010-11, much less than the Treasury's average forecasting error of 18 billion pounds two years ahead. The IFS noted food and energy inflation will exacerbate the impact of slower consumer spending on tax revenues as it will skew purchases towards items that incur a lower rate of VAT.

EXECUTIVES PREDICT RISING CONSUMER POWER

A survey conducted by the Chartered Management Institute predicts global corporations will exert more influence than governments, surveillance at work will become more widespread and consumers will become more influential in business decisions. Participants in the survey were asked to consider unexpected events that could derail the global economy, as well as more likely cases. Executives were concerned about the way in which globalisation, rising consumer power, changing demographics and technical advances would affect how businesses were managed and commercial decisions were made. Russia, China, India and Brazil were expected to influence business markets, thus placing "a greater emphasis on new skills such as understanding diversity and foreign cultures".

IRELAND'S GROWTH AT 20-YEAR LOW, SAYS THINK-TANK

Ireland's Economic and Social Research Institute predicts that this year the country will see gross national product growth of 1.6 percent, the lowest rate since 1988. The think-tank said the slowdown in housebuilding, lower consumption and a less favourable international climate for exporters would hit growth. One of the report's authors said growth may even fall to zero if the government reins in public spending to make up for last year's pre-election splurge. Ireland's general government balance is projected to fall from a surplus of 2.9 percent of GDP in 2006 to a deficit this year of 1.2 percent, falling further to a deficit of 2 percent in 2009.