The Week in Review – the inflation report released, unemployment fell in March and April and the trade figures for March are out. Download The Saturday Economist 19th May 2012

Economics news this week, the Inflation Report from the Bank of England, unemployment falls in the latest figures and the Trade Balance eases in March if you believe the headlines.

As the Governor explained during the Inflation Report presentation, “We are navigating through turbulent waters, with the risk of a storm heading our way. We do not know when the storm clouds will move away but we will be buffeted by winds from unexpected quarters. The MPC will continue to chart a course through this stormy weather, back to the calmer waters of steady growth with inflation close to target.”

OK, we have missed the inflation target again and we won’t get near it for another year at best. Furthermore we are revising our growth forecast down again. Excellent. In fact the Bank has reduced the growth forecast from 1.2% for the year to 0.8% and warned that inflation may not get back to target for another year. That will be the eighth year of overshooting.

The unemployment release was good news for the economy and at odds with the zero growth scenario as our model on page three outlines. Growth could be better than we think this year.

Not so with the trade figures, the trade deficit for the first quarter (trade in goods) was £25 billion compared to £23 billion last year. The trade in goods and services deficit was £7.9 billion compared to £4.9 billion last year. So much for depreciation theory, you have been warned.

Check out the latest discussion paper, don’t worry about the Euro, it has little impact on trade with Europe. The depreciation of Sterling doesn’t make things better, it makes things worse. JKA.