{"id":9819,"date":"2022-12-08T08:48:46","date_gmt":"2022-12-08T08:48:46","guid":{"rendered":"https:\/\/new.contentdeployment.co.uk\/tomd\/2022\/12\/08\/economic-review-november-2022\/"},"modified":"2022-12-08T14:50:12","modified_gmt":"2022-12-08T14:50:12","slug":"economic-review-november-2022","status":"publish","type":"post","link":"https:\/\/new.contentdeployment.co.uk\/tomd\/2022\/12\/08\/economic-review-november-2022\/","title":{"rendered":"Economic Review – November 2022"},"content":{"rendered":"
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OBR\nforecasts long but<\/strong> shallow recession<\/strong><\/p>\n<\/div>\n\n

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Updated\nprojections from the Office for Budget Responsibility (OBR) suggest the UK is\nfacing a long but relatively shallow recession which will see households hit by\na record drop in living standards.<\/strong><\/p>\n<\/div>\n\n

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Chancellor\nJeremy Hunt unveiled the independent fiscal watchdog\u2019s latest forecasts during\nhis Autumn Statement delivered to the House of Commons on 17 November. Mr Hunt\nsaid the country was facing \u201cunprecedented\nglobal headwinds\u201d<\/em> before announcing the OBR\u2019s new figures which show the UK\nentered recession during the third quarter of this year. <\/p>\n<\/div>\n\n

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The\nupdated predictions suggest the UK economy will expand by 4.2% across the whole\nof 2022, but then shrink by 1.4% next year before returning to growth in 2024.\nThis implies that the downturn will be relatively shallow, if long by historic\nstandards.<\/p>\n<\/div>\n\n

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Although\nthe recession is forecast to be comparatively shallow for the economy as a\nwhole, the household sector is expected to be hit particularly hard due to a\ncombination of factors including soaring energy and food prices, rising\ninterest rates and higher taxes. As a result, the OBR figures suggest\nhouseholds are facing the largest fall in living standards on record.<\/p>\n<\/div>\n\n

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Prior\nto the Chancellor\u2019s Statement, the latest gross domestic product figures from\nthe Office for National Statistics (ONS) had revealed that the UK economy\nshrank in the three months to September. ONS said the economy contracted by\n0.2% across the third quarter of the year driven by a decline in manufacturing\nwhich was evident \u2018across most industries<\/em>.\u2019<\/p>\n<\/div>\n\n

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Survey\ndata also suggests the economy continued to shrink during the first two months\nof the fourth quarter. The headline reading of S&P Global\u2019s Purchasing\nManagers\u2019 Index, for instance,\nsank to\na 21-month low of 48.2 in October and November\u2019s preliminary reading rose only\nmarginally to 48.3. Any value under 50 represents economic contraction.<\/p>\n<\/div>\n\n

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Bank Rate hiked\nsharply<\/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\nand said more rises were likely but not to levels that had been priced in by\nfinancial markets. <\/strong><\/p>\n<\/div>\n\n

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At\na meeting which concluded on 2 November, the BoE\u2019s nine-member Monetary Policy\nCommittee (MPC) voted to raise Bank Rate by 0.75 percentage points to 3.0%.\nThis was the eighth consecutive increase since December and the largest rate\nhike since 1989. In addition, minutes to the meeting stated that a majority of\nMPC members believe \u2018further increases in\nBank Rate may be required for a sustainable return of inflation to target<\/em>.\u2019<\/p>\n<\/div>\n\n

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However,\nthe minutes also pointed out that the peak in rates is expected to be lower\nthan markets had been anticipating. Indeed, in an unusually blunt message\ndelivered when announcing the rate decision, Bank Governor Andrew Bailey said,\n\u201cWe can’t make promises about future\ninterest rates but based on where we stand today, we think Bank Rate will have\nto go up by less than currently priced in financial markets.\u201d<\/em><\/p>\n<\/div>\n\n

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The\nnext interest rate announcement is due on 15 December and economists expect MPC members to sanction\nanother increase in rates \u2013 in a recent Reuters poll, more than three-quarters\nof all economists surveyed predicted rates will rise by 0.5 percentage points,\nwith all of the other respondents predicting a 0.75 percentage point increase.<\/p>\n<\/div>\n\n

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Comments\nmade during the last few weeks by a number of MPC members have also reaffirmed\nthe need for further rises in order to return inflation to the central bank\u2019s\n2% target. Some members, however, including BoE Deputy Governor Dave Ramsden,\nhave begun to mention the possibility of rate cuts at some point in the future,\nshould economic conditions diverge from current expectations and \u201cpersistence\nin inflation stops being a concern.\u201d<\/em>\n <\/p>\n<\/div>\n\n

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

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Global indices largely closed November in\npositive territory. In the UK the FTSE 100 advanced, ending the month at its highest closing level\nfor five months, supported\nby commodity and energy stocks. The blue-chip index closed the month up\n6.74% to 7,573.05, while t<\/strong>he mid-cap FTSE 250\ngained 7.12%<\/strong> and the FTSE AIM ended\nthe month up 5.27%.<\/strong><\/strong><\/p>\n<\/div>\n\n

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On Wall Street, markets closed sharply\nhigher following Federal Reserve Chair Jerome Powell\u2019s speech on 30 November, indicating\nthe central bank might scale back the pace of its interest rate hikes as soon\nas December. The Dow closed the month up 5.67% on 34,589.77, while the Nasdaq closed November on 11,468.00, up 4.37%.<\/p>\n<\/div>\n\n

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At the end of\nNovember, European Central Bank President Christine Lagarde said that a more\nhawkish line on rising inflation was needed on the continent, suggesting that more\nrate hikes are likely in the coming months. The Euro Stoxx 50 closed the month up 9.60%. In Japan, the\nNikkei 225 closed November up 1.38%.<\/p>\n<\/div>\n\n

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On the foreign exchanges, the euro closed at \u20ac1.15 against\nsterling. The US dollar closed the month at $1.19 against sterling and at $1.03\nagainst the euro. <\/p>\n<\/div>\n\n

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Brent\nCrude closed the month trading at around $86 a barrel, a loss of 5.32%. Signs of an\noversupplied market earlier on in the month pushed prices lower but it\nrecovered in recent days as discussions on a Russian price cap continue and\ngovernment data showed US stockpiles plunging, while traders accelerated buying\namid optimism that China will soon loosen restrictions. Gold\nis currently trading at around $1,753 a troy ounce, a gain of 6.99% on the month.<\/p>\n<\/div>\n\n

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Record\npay growth still lags inflation<\/strong><\/p>\n<\/div>\n\n

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While the latest\nearnings statistics revealed regular pay is now rising at a record level, the\ndata also showed wage growth is still failing to keep up with the rapidly\nrising cost of living.<\/strong><\/p>\n<\/div>\n\n

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ONS\nfigures released last month showed average weekly earnings excluding bonuses\nrose at an annual rate of 5.7% in the three months to September. This was the strongest recorded growth in regular pay\nwitnessed outside of the pandemic when the data was distorted by workers\nreturning from furlough.<\/p>\n<\/div>\n\n

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However,\nalthough the rate of pay growth is currently high by historic standards, wage\nincreases are still being outpaced by spiralling inflation \u2013 in real terms,\nregular pay actually fell by 2.7% over the year to September. This represents a\nslightly smaller decline than the record fall recorded three months ago but is\nstill among the largest falls since comparable records began in 2001.<\/p>\n<\/div>\n\n

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The\nlatest official inflation statistics also revealed a further jump in price\ngrowth during October, with soaring energy bills and food prices pushing the\nannual figure to a 41-year high. The headline rate of Consumer Price Inflation\nrose to 11.1% in the 12 months to October, a big jump from September\u2019s rate of\n10.1%.<\/p>\n<\/div>\n\n

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Retail\nsales rise in October<\/strong><\/p>\n<\/div>\n\n

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Official data shows\nthat retail sales staged a partial recovery in October although more recent\nsurvey evidence suggests retailers remain relatively pessimistic about future\ntrading prospects.<\/strong><\/p>\n<\/div>\n\n

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The\nlatest ONS retail sales statistics revealed that total sales volumes rose by\n0.6% in October, following a 1.5% decline during the previous month when shops\nclosed for the Queen\u2019s funeral. Despite this partial rebound, ONS said the\nbroader picture was that sales are still on a downward trend that has been\nevident since summer 2021 and that volumes remain below pre-pandemic levels.<\/p>\n<\/div>\n\n

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Survey\nevidence also highlights the current difficulties facing the retail sector,\nwith the latest Distributive Trades Survey from the CBI showing the net balance\nof retailers reporting year-on-year sales growth falling from +18% in October to -19% in November. A similar proportion\nalso said they expect sales to fall this month suggesting most firms anticipate\nlittle festive cheer this December.<\/p>\n<\/div>\n\n

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Commenting on the findings, CBI Principal Economist Martin Sartorius said, \u201cIt\u2019s not surprising that retailers are feeling the chill as the UK continues to be buffeted by economic headwinds. Sales volumes fell at a firm pace in the year to November, and retailers remain notably downbeat about their future business prospects.\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 accuracy\nand completeness of the information cannot be guaranteed. It does not provide\nindividual tailored investment advice and is for guidance only. Some rules may\nvary in different parts of the UK. We cannot assume legal liability for 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":"

OBR forecasts long but shallow recession Updated projections from the Office for Budget Responsibility (OBR) suggest the UK is facing a long but relatively shallow recession which will see households hit by a record drop in living standards. Chancellor Jeremy Hunt unveiled the independent fiscal watchdog\u2019s latest forecasts during his Autumn Statement delivered to the […]<\/p>\n","protected":false},"author":12,"featured_media":9845,"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\/9819"}],"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=9819"}],"version-history":[{"count":1,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/9819\/revisions"}],"predecessor-version":[{"id":9823,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/9819\/revisions\/9823"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/media\/9845"}],"wp:attachment":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/media?parent=9819"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/categories?post=9819"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/tags?post=9819"},{"taxonomy":"hd_content_source","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/hd_content_source?post=9819"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}