{"id":5259,"date":"2022-04-06T12:29:20","date_gmt":"2022-04-06T11:29:20","guid":{"rendered":"https:\/\/new.contentdeployment.co.uk\/tomd\/2022\/04\/06\/economic-review-march-2022\/"},"modified":"2022-04-06T12:32:51","modified_gmt":"2022-04-06T11:32:51","slug":"economic-review-march-2022","status":"publish","type":"post","link":"https:\/\/new.contentdeployment.co.uk\/tomd\/2022\/04\/06\/economic-review-march-2022\/","title":{"rendered":"Economic Review March 2022"},"content":{"rendered":"
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Bank Rate raised\nagain<\/strong><\/p>\n<\/div>\n\n

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Last month, the Bank\nof England (BoE) sanctioned a further increase in its benchmark interest rate\nas inflation continues to surge significantly ahead of the Bank\u2019s target level.\n<\/strong><\/p>\n<\/div>\n\n

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Following\na meeting held in mid-March, the BoE\u2019s nine-member Monetary Policy Committee\n(MPC) voted by an 8-1 majority to raise Bank Rate from 0.5% to 0.75%. This was\nthe third meeting in a row that the MPC had signalled a tightening of monetary\npolicy, taking the Bank\u2019s main interest rate back to its pre-pandemic level. <\/p>\n<\/div>\n\n

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Policymakers\ncited a strong labour market and continuing signs of \u2018robust domestic cost\nand price pressures\u2019 <\/em>as key reasons for the hike. Minutes to the meeting\nalso noted that Russia\u2019s invasion of Ukraine had led to \u2018further large\nincreases in energy and other commodity prices including food prices<\/em>.\u2019 As a\nresult, the BoE now expects inflation to reach \u2018around 8% in April<\/em>,\u2019\nalmost a full percentage point higher than it forecast in February and four\ntimes its 2% target figure.<\/p>\n<\/div>\n\n

\n

While\nthe minutes did say that \u2018some further modest tightening in monetary policy\nmay be appropriate in the coming months\u2019<\/em> they also pointed to concerns\nabout the outlook for growth as households struggle with a squeeze on incomes.\nIndeed, analysts noted a more dovish tone than was evident in the previous set\nof minutes, with a distinct softening of the language on the need for future\nrate hikes.<\/p>\n<\/div>\n\n

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Data\nsubsequently released by the Office for National Statistics (ONS), however,\nshowed that price rises continue to exceed analysts\u2019 expectations. In the 12\nmonths to February, the rate of inflation as measured by the Consumer Prices\nIndex, surged to a 30-year high of 6.2%. This was significantly up on the\nprevious month\u2019s rate of 5.5%, and 0.3% higher than the median forecast in a\nReuters poll of economists.<\/p>\n<\/div>\n\n

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OBR\ndowngrades growth forecast<\/strong><\/p>\n<\/div>\n\n

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The\nOffice for Budget Responsibility (OBR) has downgraded its forecast for UK\neconomic growth over the next two years amid an unprecedented squeeze on\nhousehold finances.<\/strong><\/p>\n<\/div>\n\n

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Chancellor\nRishi Sunak unveiled the independent forecaster\u2019s revised projections during\nhis Spring Statement, delivered to the House of Commons on 23 March. The new\nforecast suggests the economy will expand by 3.8% in 2022, significantly down\non October\u2019s 6.0% prediction. Next year is also expected to yield lower growth,\nwith the economy forecast to expand by 1.8% compared to a previous prediction\nof 2.1%.<\/p>\n<\/div>\n\n

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The\ndowngrades partly relate to Russia\u2019s invasion of Ukraine which the OBR warned\nwould have \u2018major repercussions for the global economy<\/em>.\u2019 In addition,\nthey reflect a sharp squeeze on living standards with real disposable household\nincomes expected to fall by 2.2% in the coming financial year \u2013 this would\nrepresent the biggest annual decline in UK living standards since records began\nin 1956.<\/p>\n<\/div>\n\n

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Ironically,\nthe latest gross domestic product statistics released by ONS showed the UK\neconomy grew by a faster than expected 0.8% in January. This was the strongest\nmonthly expansion since last June and beat all forecasts in a Reuters poll of\neconomists. <\/p>\n<\/div>\n\n

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Survey\ndata also suggests the economy continued to expand at a robust pace during the\nlast two months. The preliminary reading of the S&P Global\/CIPS Composite\nPurchasing Managers\u2019 Index (PMI), for instance, came in at 59.7 in March, only\nmarginally below February\u2019s historically high figure of 59.9. <\/p>\n<\/div>\n\n

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S&P\nGlobal Chief Business Economist Chris Williamson said, \u201cThe further\nreopening of the economy after COVID-19 containment measures helped offset\nheadwinds from the Ukraine war, Brexit and rising prices.\u201d<\/em> However, he also\nnoted that the PMI\u2019s measure of business optimism slumped to a 17-month low in\nMarch, adding, \u201cIndicators point to potentially sharply slower growth in the\ncoming months.\u201d<\/em> <\/p>\n<\/div>\n\n

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Markets\n<\/strong>(Data compiled by TOMD)<\/strong><\/p>\n<\/div>\n\n

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The\nongoing conflict in Ukraine continues to impact global markets, as they closed out a turbulent quarter. The invasion is\nexacerbating inflationary pressures, driving up the cost of everything from\nfuels to food, leading to volatility across commodity markets in particular.<\/strong><\/p>\n<\/div>\n\n

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At the end of March, falling oil prices\nand escalating inflation figures from the US weighed on investor sentiment. The oil price declined\nafter the\nOrganization of the Petroleum Exporting Countries and allies (OPEC+)\nagreed to another modest monthly oil output boost, resisting pressure to pump\nmore oil, despite consumer calls for increases. Joe Biden later issued the release of\none million barrels a day from crude reserves in an effort to tame energy costs,\ncommencing in May.<\/p>\n<\/div>\n\n

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Looking at major global\nindices, in the UK, as the dust\nsettles on the Spring Statement and recent OBR estimates, the FTSE\n100 closed the month up 0.77% on 7,515.68, while the FTSE 250 and AIM both\nrecorded marginal gains of 0.37% and 0.19% respectively. In\nthe\nUS, the Dow Jones closed March up 2.32%, while the NASDAQ finished 3.41% up. In Japan, the\nNikkei 225 ended the month on 27,821.43, up 4.88%, and the Euro Stoxx 50 closed\nMarch down 0.55% on 3,902.52. <\/p>\n<\/div>\n\n

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On\nthe foreign exchanges, sterling closed the month at $1.31 against the US\ndollar. The euro closed at \u20ac1.18 against sterling and at $1.10 against the US\ndollar.<\/p>\n<\/div>\n\n

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Brent Crude closed the month trading at around $108 a barrel, a gain of over 10%. Gold is currently trading at around $1,924 a troy ounce, a gain of just over 1% on the month.<\/p>\n<\/div>\n\n

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\"\"<\/figure><\/div>\n<\/div>\n\n
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Unemployment\nbelow pre-pandemic rate<\/strong><\/p>\n<\/div>\n\n

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The latest set of\nlabour market statistics published by ONS revealed a further <\/strong>fall<\/strong> in the rate of\nunemployment, although real pay growth continues to <\/strong>lag<\/strong> the <\/strong>spiralling<\/strong> cost of living.<\/strong><\/p>\n<\/div>\n\n

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In the\nthree months to January, the unemployment rate fell to 3.9%, down from 4.1%\nacross the previous three-month period. This was the lowest level since the\nthree months to January 2020 and took the jobless rate back below its\npre-pandemic level.<\/p>\n<\/div>\n\n

\n

The data\nalso showed another strong rise in the number of pay-rolled employees in\nFebruary and yet another record number of job vacancies. The number of people\nout of work but not looking for a job also rose again, however, which meant the\ntotal number of people in employment remains well below its equivalent\npre-pandemic figure.<\/p>\n<\/div>\n\n

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In terms of\nwage growth, the data showed average weekly earnings, excluding bonuses, rising\nat an annual rate of 3.8% across the November\u2013January period. Although this was\na slight increase from the previous three-month period, it did mean that pay\nonce again failed to keep up with the rapid rise in prices. Indeed, after\ntaking account of inflation, regular earnings fell by 1% compared to year\nearlier levels. <\/p>\n<\/div>\n\n

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Retail\nsales decline<\/strong><\/p>\n<\/div>\n\n

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Official retail sales\nfigures have revealed a drop in sales volumes during February while survey\nevidence suggests sales remained disappointing in March.<\/strong><\/p>\n<\/div>\n\n

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ONS\ndata showed that total retail sales volumes unexpectedly declined by 0.3% in\nFebruary compared to the previous month. An ONS spokesperson said retailer\nfeedback linked some of the fall to stormy weather which had kept shoppers at\nhome, while the easing of COVID restrictions resulted in more people returning\nto pubs and restaurants at the expense of grocery sales.<\/p>\n<\/div>\n\n

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The\nlatest Distributive Trades Survey from the CBI suggests sales growth remained\nrelatively weak last month with its sales-for-the-time-of-year gauge falling\nfrom +16 in February to -23 in March. Retailers also said they expect sales to\nremain below seasonal norms this month, although to a lesser extent.<\/p>\n<\/div>\n\n

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Commenting\non the findings, CBI Principal Economist Martin Sartorius said, \u201cRetailers\nhad a mediocre March, with sales reported as being below seasonal norms. The\ncost-of-living crisis is looming large across the sector, as households\u2019\nwallets are being hit by the fastest rate of inflation in decades. Further\naction will be needed to galvanise consumer confidence, shore up incomes, and\nsupport spending on UK high streets in the tough months to come.\u201d <\/em><\/p>\n<\/div>\n\n

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It\nis important to take professional advice before making any decision relating to\nyour personal finances. Information within this document is based on our\ncurrent understanding and can be subject to change without notice and the\naccuracy and completeness of the information cannot be guaranteed. It does not\nprovide individual tailored investment advice and is for guidance only. Some\nrules may vary in different parts of the UK. We cannot assume legal liability\nfor<\/strong> <\/p>\n<\/div>\n\n

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any\nerrors or omissions it might contain. Levels and bases of, and reliefs from,\ntaxation are those currently applying or proposed and are subject to change;\ntheir value depends on the individual circumstances of the investor. No part of\nthis document may be reproduced in any manner without prior permission.<\/strong> <\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"

Bank Rate raised again Last month, the Bank of England (BoE) sanctioned a further increase in its benchmark interest rate as inflation continues to surge significantly ahead of the Bank\u2019s target level. Following a meeting held in mid-March, the BoE\u2019s nine-member Monetary Policy Committee (MPC) voted by an 8-1 majority to raise Bank Rate from […]<\/p>\n","protected":false},"author":12,"featured_media":5261,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[32,34],"tags":[],"hd_content_source":[116],"_links":{"self":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/5259"}],"collection":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/comments?post=5259"}],"version-history":[{"count":1,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/5259\/revisions"}],"predecessor-version":[{"id":5262,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/5259\/revisions\/5262"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/media\/5261"}],"wp:attachment":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/media?parent=5259"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/categories?post=5259"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/tags?post=5259"},{"taxonomy":"hd_content_source","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/hd_content_source?post=5259"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}