TOMD Content Deployment

“With food price inflation likely to slow in the coming months as we enter the UK growing season, we expect wider inflation will continue to ease”

The latest figures from the Office for National Statistics (ONS) highlight that the Consumer Prices Index (CPI) increased by 10.1% in the 12-month period to March 2023, down from 10.4% in the year to February. A poll of economists had predicted that inflation would fall below 10% in the month, but soaring food and drink prices meant the fall was only 0.3%.

Although lower than the peak of 11.1% last October, double-digit inflation is persisting. Among the most notable upward contributor to CPI was the food and non-alcoholic beverages sector, where prices rose by 19.2% in the year to March. This annual rate is the highest seen in over 45 years. Products with the largest price jumps included olive oil (49%), milk (38%) and ready meals (21%).

Chief Executive of the British Retail Consortium, Helen Dickinson, predicts that food price inflation is likely to slow in the coming months, “While households will be pleased to see that inflation may have passed its peak, prices are still high… With food price inflation likely to slow in the coming months as we enter the UK growing season, we expect wider inflation will continue to ease.”

She continued, “Prices for consumers will remain high, especially as household bill support is lifted. Retailers remain committed to helping their customers and keeping prices as low as possible, by expanding value ranges and offering discounts for vulnerable groups.”

Following the latest inflation figures there are expectations that the Bank of England will look to raise Bank Rate again in May as inflationary pressures persist.

UK inflation is higher than in many other western countries, including France, Germany, Italy and the US. Official data released last week showed eurozone headline annualised inflation had eased to 6.9% from 8.5%. It is reported that persistently high core readings indicate European Central Bank policymakers will look to raise interest rates again at their next meeting in early May.

Retail sales impacted by the weather

UK retail sales data released by ONS on Friday show a higher decline in sales volumes than expected, with early estimates registering a 0.9% fall in March, following a 1.1% rise the previous month. Volumes were impacted by soaring inflation, food availability and the wet weather dampening shopping activity, with people choosing to stay at home. The data release goes on to state, ‘Looking at the broader picture, sales volumes rose by 0.6% in the three months to March 2023 when compared with the previous three months; the first three-month on three-month rise since August 2021.’

Consumer confidence – a “sudden flow of optimism”

According to the latest consumer confidence measure on Friday from GfK, despite cost-of-living pressures, British consumers were their most upbeat in over a year this month as they took a more positive view of the health of the economy and their own financial circumstances. The rebound in April was clear, with the index rising six points to -30 in April, the highest level since February 2022. In addition, a measure regarding personal finances over the forthcoming year rose eight points to -13, and expectations for the UK economy in general rose six points to -34.

Client Strategy Director at GfK, Joe Staton commented on the findings, “As food and energy prices continue to rise, and inflation eats into wages, the cost-of-living crisis is a painful day-to-day reality for many. But are all consumers buckling under the pressure? On the evidence of April’s confidence figures, the answer is no. Instead, there’s a sudden flowering of optimism with big improvements across the board.”  Mr Staton continued, “The brighter views on what the general economy has in store for us, with April’s six-point rise cementing a 20-point improvement since January, could even be seen as the proverbial ‘green shoots of recovery.”

Private sector growth

Business activity has grown for the third consecutive month, the latest purchasing managers’ index (PMI) has shown. In April, service sector growth underpinned the fastest rise in UK private sector output for a year, with firms reporting resilient consumer spending, according to the latest survey results. The index registered a score of 53.9 this month, up from 52.2 in March, and above analysts’ consensus forecasts of 52.5.

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

All details are correct at time of writing (26 April 2023)

“The UK economy has lost momentum”

New data from the Office for National Statistics (ONS) shows that the UK economy flatlined in February as strikes by public sector workers weighed on growth. Despite consensus estimates from a poll of economists forecasting a 0.1% increase in the month. The flat month-on-month performance can be attributed to the offsetting of construction growth by striking workers.

In more positive news, ONS revised up its estimate for January’s economic growth from 0.3% to 0.4%, meaning the UK is well positioned to avoid contraction in the first quarter of this year. This upward revision means the economy would need to reduce by 0.6% in March for Q1 to record a contraction. In response to the data release, Chancellor Jeremy Hunt said the economic outlook was “brighter than expected” with the UK “set to avoid recession.”

Suren Thiru, Economics Director at the Institute of Chartered Accountants in England and Wales (ICAEW) expects recession fears “are likely to stalk the UK for some time” as borrowing costs and higher taxes offset falls in inflation and government support for energy bills. She commented, “These figures suggest that the economy has lost momentum as sky-high inflation and strike action continue to drag on key drivers of UK GDP, notably services and industrial production… a struggling economy and strong likelihood of materially lower inflation should give the Monetary Policy Committee sufficient scope to keep rates on hold next month.”

Last week the International Monetary Fund (IMF) cautioned in their latest World Economic Outlook that they expect the UK to be one of the most poorly performing major economies in 2023, with expectations of a 0.3% reduction. The UK and Germany are the only two G7 countries predicted to contract this year.

“The system is in a much more robust condition”

After the recent unrest experienced in the financial sector, with the collapse of Silicon Valley Bank and the purchase of failing Credit Suisse, speaking at an IMF meeting last week, Bank of England (BoE) Governor Andrew Bailey commented, “I do not see the evidence that we’ve got on our hands what I would call the makings of a 2007/08 financial crisis. I think the system is in a much more robust condition – that’s the first point of defence.”

Believing that the reforms established following the 2008 financial crisis are being effective, Mr Bailey also feels that authorities are now better equipped to deal with any potential problems, “The post-crisis reforms to bank regulation have worked. Today I do not believe we face a systemic banking crisis. When I look at the UK banks, they are well capitalised, liquid and able to serve their customers and support the economy.” A review is being conducted into the bank deposit insurance scheme.

Banknote demand at 20-year low

Worldwide demand for banknotes is at its lowest point in 20 years, according to De La Rue, which produces a third of the world’s banknotes. With the rise of card and contactless payments, cash usage has fallen sharply in the UK. In 2017, debit cards overtook cash as the most popular payment method for the first time; only 15% of payments are now made in cash, compared with 60% a decade ago.

Unemployment rate rises again

Job vacancies have fallen for a ninth consecutive month, according to latest official unemployment data released by ONS on Tuesday. The uncertain economic outlook is impacting job certainty, the figures suggest, but the employment rate edged up to 75.8% in the three months to February.

About 220,000 more people were seeking work between December and February than in the three previous months. In the same period, however, the unemployment rate rose to 3.8%, up slightly from 3.7% in the previous quarter.

Annual growth in regular pay, excluding bonuses, was 6.6% between December and February, ONS said. However, with prices rising at more than 10% in recent months, regular pay fell by 2.3% when adjusted for inflation.

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

All details are correct at time of writing (19 April 2023)

“Now is not the time for complacency”

Speaking at an event last week, Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva outlined the financial agency’s global growth expectations for 2023. The Fund believe, that despite labour market resilience and strengthening consumer demand, economic growth will drop below 3% this year and remain at around 3% over the next five years. This estimate represents the global lender’s lowest medium-term growth forecast in over thirty years and sits below the average growth rate of 3.8% seen in the last twenty years.

Ms Georgieva indicated that prospects remain weak in the face of persistently high inflation, adding that recent issues in the banking sector in Europe and the United States have exposed financial vulnerabilities that have contributed towards increased risks for the global economy. She highlighted, “With rising geopolitical tensions, with inflation still running high, a robust recovery remains elusive, and that harms the prospects of everyone, especially for the most vulnerable people and the most vulnerable countries.”

Expectations from the IMF signal that half of global growth this year will be attributed to China and India, with around 90% of advanced economies experiencing a reduction in their growth rate in 2023. Countries with low incomes, hampered by weakening export demand and higher borrowing costs, are likely to experience per-capita income growth below emerging economies.

Addressing the recent banking sector woes and praising policymakers’ fast response to stress in the sector, Ms Georgieva commented, “The key is to carefully monitor risks in banks and non-bank financial institutions, as well as weaknesses in sectors such as commercial real estate. Now is not the time for complacency.” Despite some of the risks in the financial sector being “more exposed,” she maintains “full confidence” that central banks are being vigilant.

With spring meetings between the IMF and World Bank scheduled to commence this week, further details of growth expectations for the year ahead and the direction of the global economy will be released in the coming days.

Good Friday shopping exceeds expectations

Data from Springboard has shown that High Street footfall on Good Friday ‘exceeded all expectations,’ signalling a ‘continuation of strong activity.’ Both shopping centres and retail parks also experienced an increase in customers year-on-year. However, despite the promising turnout, overall footfall fell by 11% when compared with pre-pandemic data from 2019.

Car sales impress in Q1

Last Wednesday, the Society of Motor Manufacturers and Traders (SMMT) reported that new car registrations rose for the eighth consecutive month in March. Following an 18.2% year-on-year jump, numbers reached 287,825 units last month, which makes Q1 2023 the strongest quarter since 2019.

Notably, battery electric vehicle (BEV) sales reached a record monthly high in March, an 18.6% year-on-year growth. Mike Hawes, CEO of the SMMT, commented, “The best month ever for zero emission vehicles is reflective of increased consumer choice and improved availability but if EV market ambitions – and regulation – are to be met, infrastructure investment must catch up.”

Post-Brexit border checks – a huge step forward?

Food logistics trade body the Cold Chain Federation has expressed concerns that fresh government plans for post-Brexit border controls on UK imports could deter many EU suppliers. The government proposals, required as per the UK’s trade agreement with the European Union, are hoped to limit delays by reducing the need for physical checks for many imported goods, with the Cabinet Office professing the measures are a ‘huge step forward for the safety, security and efficiency of our borders.’

However, the Cold Chain Federation is expecting the forms and costs involved to ‘fuel shortages and price inflation,’ with Chief Executive Shane Brennan commenting, “Six years since the UK started the process of leaving the EU and after two previous postponements to bringing in the necessary food controls, the proposals today are a massive disappointment. They solve none of the real risks facing our post-Brexit food supply chains and will exacerbate shortages on the shelf and food inflation… None of the fundamental problems have been solved and business have nowhere near enough time to prepare.”

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

All details are correct at time of writing (12 April 2023)

“There’s underlying resilience in the UK economy”

On Friday, the Office for National Statistics (ONS) revised its Q4 2022 data showing that the UK economy performed better than previously estimated. UK gross domestic product (GDP) is now estimated to have increased by 0.1% in the final quarter, up from the previous estimate of no growth.

With the revision, it was revealed that telecommunications, construction and manufacturing performed better than initially thought. In output terms, the services sector grew by 0.1% and the construction sector grew by 1.3%.

The new figures confirm that the UK economy avoided falling into recession at the end of 2022. The level of real GDP in Q4 2022 is now 0.6% below where it was before the pandemic, revised upwards from the previous estimate of 0.8% below.

Separately, the Institute of Directors released a survey that showed improved demand, confidence, hiring and investment intentions in March, boosting hopes that the economy may be firmly back on track. Of more than 900 firms surveyed in March, exactly half reported that their order books were healthier than at the end of 2022.

Commenting on the ONS figures, Chancellor Jeremy Hunt said, “There’s underlying resilience in the UK economy … We will continue to take the difficult decisions necessary to bring down inflation caused by what’s happened in Ukraine. That is the way we will get back to healthy growth and relieve the pressure on families.”

Mixed bag for manufacturing

March is the eighth straight month in which UK manufacturing activity has fallen, according to figures released on Monday by the seasonally adjusted S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index (PMI). The headline reading fell to 47.9 in March, a fall from February’s seven-month high of 49.3 and below forecasts of 49.8.

Despite the negative reading, manufacturers continue to report improving supply conditions. Notably, cost pressures softened, with some lower commodity prices and falling freight rates passed on by suppliers. Delivery times improved too, with reports of shorter delivery times from suppliers at their most widespread since the survey started in 1992.

In response to these positive signs, business expectations rose, as shown by the PMI’s gauge of future output reaching its highest level since February 2022. Rob Dobson, director at S&P Global Market Intelligence, commented, “UK manufacturing production fell back into contraction at the end of the opening quarter, as companies scaled back production in response to subdued market conditions. There was better news on the price and supply fronts during March, however. […] Supply chains continued to recover from the immense pressure experienced over the past three-and-a-half years, with March seeing average vendor lead times improve to the greatest extent during the        31-year survey history.”

House prices down again

House prices across the UK are continuing to fall, according to the latest House Price Index from Nationwide, with a seventh consecutive monthly drop recorded in March.

On average, prices dropped by 3.1% year-on-year in March, the biggest annual decline since July 2009. All regions experienced a slowing in price growth in Q1, the report stated, while nine out of 13 regions saw annual prices fall. The West Midlands was the strongest performing region, with prices up 1.4% compared with a year ago.

Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, cautioned, “It will be hard for the market to regain much momentum in the near term since consumer confidence remains weak and household budgets remain under pressure from high inflation.”

Price of stamps

Since Tuesday, all standard Royal Mail stamps now feature King Charles’ portrait. A day earlier, the price of first-class stamps rose by 15p to £1.10, while second class stamps rose by 7p to 75p.

Oil surges as production held back

Oil prices surged on Monday after several of the world’s largest exporters announced surprise cuts in production. On Sunday, OPEC+ announced plans to lower output targets by a further 1.16 million barrels per day; in response, Brent crude prices rose by more than 6% on Monday.

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.