Since its buying programme began in March, the Bank of England has swallowed up more gilts than the Debt Management Office (DMO) has issued. So which sector of the market has reduced its holdings?

The table, derived from Bank of England and DMO data, shows issuance and transactions by sector between March and October, with the prior eight months included for comparison. The Bank's buying exceeded DMO net sales by £26 billion in the latest eight months. The counterpart was a £24 billion decline in holdings of the "non-bank private sector". The combined holdings of overseas investors, banks and building societies were little changed.

The non-bank private sector comprises households, non-financial companies, insurance companies and pension funds, and other financial institutions. A monthly breakdown is not available but quarterly figures show that insurers and pension funds bought £12 billion of gilts between April and September, non-financial corporate holdings were little changed while households and other financial institutions sold £6 billion and £35 billion respectively.

The other financial category includes unit and investment trusts, other fund managers, including hedge funds, and securities dealers. Limited further information is available but the recent sales are likely to have been dominated by hedge funds and dealers.

These other financial firms have successfully traded the gilt market in recent years. They were heavy buyers before and during the financial crisis, boosting their holdings from £45 billion at the start of 2006 to £137 billion by the end of 2008. The 10-year benchmark yield averaged 4.7% over this period.

They started to unload their position in the first quarter of 2009 as the Bank began buying. Sales accelerated during the second and third quarters, when the 10-year yield averaged 3.7%. Their holdings had fallen to £96 billion by the end of September.

Gilt market optimists argue that the ending of the Bank's buying programme will be offset by stepped-up demand from insurance companies, pension funds and banks. Inflows to insurers and pension funds, however, have been weak while their liquidity ratio has fallen significantly – see chart. Banks' need to increase their holdings of liquid assets, meanwhile, has been satisfied recently by a rise in their reserve balances at the Bank of England – see memo line in table.

Yesterday's GDP figures, showing a 0.2% decline in the third quarter, disappointed economists expecting a more substantial upward revision to the previously-estimated 0.3% fall. The report's details, however, support recovery hopes and were reinforced by today's October services output number.

• A monthly GDP estimate derived from data on services and industrial output indicates that the third-quarter decline was due to a blip lower in August – see first chart. GDP is on course to post a solid gain in the fourth quarter, with the October estimate 0.3% above the third-quarter level.

• Last quarter's contraction was mainly due to lower North Sea output – GDP excluding oil and gas extraction fell by just 0.04%. This measure has declined by less than during the 1979-81 recession – 5.6% since the first quarter of 2008 versus 6.4% between the second quarter of 1979 and first quarter of 1981.

• An expenditure-based measure of GDP is more upbeat than the "official" series, which relies heavily on gloomy output data. Excluding statistical adjustments, expenditure GDP rose by 0.5% in the third quarter – second chart. This measure also suggests a later start-date to the recession, peaking in the second rather than first quarter of 2008.

• Destocking was again heavy in the third quarter, implying a substantial GDP boost as it subsides. Meanwhile, household finances have improved more rapidly than expected: the saving ratio is at an 11-year high while the debt to income ratio has fallen by 18 percentage points from its peak – third chart.

• As in the US, non-financial companies continue to run a large financial surplus (i.e. retained earnings are far ahead of capital spending) – typically a precursor of more expansionary behaviour. Excluding reinvested foreign earnings, the surplus amounted to 2.4% of GDP last quarter versus 1.3% in the US. Excess free cash flow, rather than credit supply constraints, is the main driver of the ongoing repayment of bank borrowing by companies.

In its October World Economic Outlook, the IMF forecast a rise in consumer price inflation in the advanced economies from 0.1% in 2009 to 1.1% in 2010. The increase is likely to be much larger barring renewed commodity price weakness.

The first chart shows the annual change in the consumer price index (CPI) for the Group of Seven (G7) major countries – a proxy for advanced economies – together with the 12-month movement in the IMF's world commodity export price index. The latter is projected forward assuming that commodity prices stabilise at their October level (the latest reading of the IMF index). The relationship suggests a rise in G7 annual inflation to at least 2% in early 2010 and an average for the year well above the IMF's 1.1% forecast.

Its projections for emerging and developing countries are also questionable. Spare capacity is limited in many emerging economies and consumer price indices typically assign a higher weight to commodities than in developed countries. Yet the IMF forecasts a decline in average CPI inflation for the group to 4.9% in 2010 from 5.5% in 2009.

Projected falls in Chinese and Indian inflation – to 0.6% and 7.4% respectively in 2010 – are particularly implausible. Chinese prices are likely to accelerate in the wake of 30% growth in the M2 money supply in the year to November while the Indian forecast implies a sharp reversal of the current rising trend – second chart – despite still-loose monetary policy.