Author Mark Richards
Looking back through the posts we have written in July there does not seem to have been a lot of good news. And now the weather forecasters are telling us summer is over. So maybe we can find some reasons to be cheerful for a Monday…
On the face of it, July has been a gloomy month. Real wages are under pressure and – as we wrote on Friday – parents of school age children are going to be hit hard in the summer holidays as the cost of care increases. Perhaps those factors contributed to the 1-in-3 employees who are suffering from stress, anxiety or depression. And if you think you can ease the pressure by doing a little work for cash in the shadow economy, think again. The recently-released Taylor Report has called for an end to cash payments: any day now we will (in theory) be paying for our haircut with PayPal…
So plenty of doom and gloom – especially if you live on the Shimmer Estate just outside Sheffield. No, it probably is not worth re-decorating the lounge if you live there: Her Majesty’s Government will shortly be knocking your house down to make way for HS2.
Let us therefore try and find something cheerful to write about this Monday. In fact, there is plenty of good news around: here are seven very definite economic ‘reasons to be cheerful’ and – if you click the link, one musical one.
The figures for employment are good
Specifically, there are more people in work than ever before. The latest figures, issued by the Office for National Statistics (ONS), for the period to the end of May, show that there are now 32.01m people in work – an increase of 175,000 on the previous quarter and 324,000 more than the same period in 2016 (to give you some perspective, that is more people than live in Newcastle).
The employment rate (the proportion of people aged from 16 to 64 who were in work) rose to 74.9% – the highest since records began in 1971. And unemployment dropped another 64,000 to 1.49m to give an unemployment rate of 4.5%, the lowest level since 1975.
The stock market is up.
At the end of July last year – roughly a month after the vote to leave the European Union – the FT-SE100 index of leading shares closed at 6,724. At the time of writing it is at 7,483 – a rise of 11.3%. It is easy to think, ‘Well, I don’t have any investments so it doesn’t affect me’ but virtually everyone with a company pension will be affected by movements in the stock market. In simple terms, if the stock market goes up, the value of your pension goes up.
Retail may be recovering.
If we are talking doom and gloom then no sector of the economy has been hit harder than retail, as more and more business moves online. As recently as April we were writing that retail sales had fallen at their fastest quarterly rate since 2010, but the high street has staged a spirited fightback in the second quarter of the year, raising hopes that consumer spending will continue to fuel economic growth.
The ONS revealed that retail sales were up by 0.6% in June, and by 1.5% for the second quarter of the year. Kate Davies, a senior statistician at the ONS, said,
“The retail sales figures show overall growth. A warm June has prompted strong sales in clothing which has more than compensated for a decline in food and fuel sales.”
Richard Lim, chief executive of consultancy Retail Economics commented that
“Any anxiety over the election, Brexit or the squeeze on incomes seems to have been put to one side for the moment.”
There is also good news on inflation
Inflation had risen to 2.9%. But figures for June showed that it had dipped sharply to 2.6%, largely thanks to fuel prices falling. This eased pressure on the Bank of England to raise interest rates at its next monthly meeting. Economists had generally expected inflation to stay at the higher 2.9% figure and there is now hope that inflation will not rise to the levels above 3% that were forecast last month – which would be good news for everyone’s disposable income.
Foreign investment in the UK is continuing.
Despite Brexit, the UK is still seen as the number one destination in Europe for foreign investment, with UK investments rising to £197bn in 2016 – up from £33bn in the previous year. This was the highest level of foreign investment in the country since 2005.
And then there is Donald…
Whisper it quietly – he is certainly not everyone’s cup of tea – but the 45th President of the United States could be good news for the British economy. With Donald Trump committing to higher levels of investment in US infrastructure, even the Bank of England is admitting this will be good news for the UK economy.
Ben Broadbent, Deputy Governor of the Bank of England, has said that the UK is in line to benefit from higher spending by the US Government. He told the BBC,
“Business confidence has risen in the United States: there has to be some positive impact on the UK.”
And, of course, President Trump has now said that the UK will be first-in-line for a free trade agreement when it leaves the European Union.
Extra fees for debit and credit cards are to be banned
Quite right too – the Government cannot publish the Taylor Report suggesting we move away from cash and then allow businesses to penalise people who do not use cash. From January next year extra fees for using a debit or credit card – which currently cost UK consumers more than £500m a year – will be banned. The worst offenders are probably airlines and food delivery apps, and the ruling will also apply to payments by PayPal.
So seven good economic reasons to be cheerful. But if you want one more, non-economic reason, then football season is just around the corner! Every football fan is optimistic in July (unless it is a World Cup year, of course…) The Financial Conduct Authority is very keen on ‘full disclosure’ – so it seems only right that we disclose that the writer of this article is a long-suffering supporter of Wolverhampton Wanderers. Do not expect him to be so cheerful by September…