UK – Digital Finance Analytics (DFA) Blog

UK Inflation Surprises On The Downside…

Prices rose by 3.9% in the year to November, down from 4.6% in October according to data from the ONS today, driven by positive base effects mainly across oil products. Remember that falling inflation also does not mean most goods and services are cheaper, but rather prices are rising less quickly.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 4.2% in the 12 months to November 2023, down from 4.7% in October. On a monthly basis, CPIH fell by 0.1% in November 2023, compared with a rise of 0.4% in November 2022. Within that energy prices fell, but rent and council tax were higher.

Slowing price rises for food, including staples such as pasta, milk and butter, as well as for household goods were also behind the fall.

But while inflation, which is the rate prices rise at, is now well down from its peak in 2022, it is still almost double the Bank of England’s 2% target.

UK inflation remains higher than in other countries including the US and Germany but the gap is narrowing. The fall to 3.9% in November puts the UK on level footing with France, but ahead of the EU’s average rate of 3.1% and the US’s 2.1%.

The softer inflation data prompted Goldman Sachs to bring forward its expectation for the first BOE rate cut to May from June previously.

Ahead, of course the impact of potentially higher Oil prices thanks to the closure of the Suez Canal for some ships, which have driven oil prices higher, and the removal of Government support for higher power prices might turn the inflation gauge higher in the months ahead. So again, markets are ahead of themselves, it will be some time before inflation is approaching the 2% target.

Digital Finance Analytics (DFA) Blog

UK Inflation Surprises On The Downside...

00:00 / 00:07:46

UK Inflation Surprises On The Downside…

That rise compares to a more-than four-decade high rate above 11% reached last year. The last time inflation in the UK was lower than 3.9% was in September 2021 when it was 3.1%. Most economists had expected UK inflation to fall to 4.3% last month. As a result, UK inflation has fallen to its lowest level for more than two years, driven largely by a drop in fuel prices.
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 4.2% in the 12 months to November 2023, down from 4.7% in October. On a monthly basis, CPIH fell by 0.1% in November 2023, compared with a rise of 0.4% in November 2022. Within that energy prices fell, but rent and council tax were higher.

Slowing price rises for food, including staples such as pasta, milk and butter, as well as for household goods were also behind the fall.

But while inflation, which is the rate prices rise at, is now well down from its peak in 2022, it is still almost double the Bank of England’s 2% target.

The softer inflation data prompted Goldman Sachs to bring forward its expectation for the first BOE rate cut to May from June previously.

Pickled Brits Anyone?

Well, the slew of economic data in the past few days suggests the UK economy is in a bit of a pickle, with a mix of recessionary signals pulling against some more positive wages news (at least for some). And it highlights the dilemma facing many Central Banks, as their data dependency pulls them in multiple directions and highlights how complex the current environment actually is.

It seems the economy is losing steam, though that’s partly driven by industrial action and unusually wet weather but its tracking well below the Bank of England’s growth forecast for 3Q, and yet cost pressures in the UK are running too high for the central bank to be bounded by growth concerns just yet.

The latest data from the ONS showed that the UK economy shrank at the fastest pace in seven months in July as strikes and wet weather hit activity harder than expected, reviving fears that a recession may be under way.
Gross domestic product slipped by 0.5% following a 0.5% gain in June. Economists had expected a contraction of 0.2%. Services, construction and manufacturing all shrank.

The main cause of the contraction was the dominant services sector, which fell 0.5% in July. Cool and rainy weather depressing retail sales during the month. Output was also dented as doctors, teachers and rail staff walked off the job in their disputes with the government over pay.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

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Digital Finance Analytics (DFA) Blog

Pickled Brits Anyone?

00:00 / 00:16:18

Pickled Brits Anyone?

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

The UK Economy Is Delicately Placed!

The Bank of England, alongside other Central Banks say they are being data dependent as they try to balance interest rates, inflation, growth and employment.

So the latest from the UK ONS revealed that the UK economy delivered its strongest quarterly growth in more than a year, a surprising show of resilience that will keep pressure on the Bank of England to raise rates further to generate more weakness to bring inflation down in line with its forecasts.

The Bank of England is concerned that the economy’s pace, while sluggish by historical standards, is fanning upward pressure on wages and prices. While inflation has edged lower from last year’s high, it remains more than triple the BOE’s 2% target.

Gross domestic product rose 0.2% from the first quarter, the biggest increase since the start of 2022, the Office for National Statistics said Friday. The Bank of England had expected a 0.1% expansion. Output in June jumped 0.5%, more than double the 0.2% pace expected by economists.

Manufacturing and construction output were both stronger than expected in June, rebounding from the loss of a working day in May for King Charles III’s coronation. The figures point to momentum in the economy that’s likely to fan upward pressure on wages and prices, underpinning the case for more rate hikes.

Consumer spending during the quarter rose 0.7%, its biggest quarterly increase in more than a year. Business investment climbed 3.4%, a similar pace to the previous quarter. There was also a strong increase in government spending. Together, these factors offset a drag from net trade, as the volume of imports outpaced exports.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

UK Levelled Down To The Ground. [Podcast]

I am here running a project to measure financial stress in the UK, using the same methods as in Australia for the past two decades, and down the track I will be able to report and compare data across the country.

And this is timely, given that Gross domestic output is unlikely to return to its pre-pandemic level before 2024, according to just published forecasts from the London-based National Institute of Economic and Social Research. And worse, the UK is headed for five years of lost economic growth as the government fails in its goal to “level-up” the country’s regions and reduce inequality, an influential think tank says.

While output across the country will be lackluster, NIESR said, some regions will feel a sharper pinch. In London, it expects real wages will grow by up to 7% in the five years from the end of 2019 — but in the West Midlands, home to Britain’s third-largest city Birmingham, NIESR is projecting a 5% drop in inflation-adjusted pay.

The broader economy’s tepid pace of growth is one of the factors feeding a gap between the rich and poor, NIESR said. It predicted little real wage growth for low-income households, which also will have to shoulder higher levels of debt as food, energy and housing costs remain historically high.

By 2024, the UK’s poorest households could be facing a shortfall in their disposable incomes of 17% relative to 2019, compared to 5% for the richest households, the think-tank predicted.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog

UK Levelled Down To The Ground. [Podcast]

00:00 / 00:07:27

The Biggest Drop In Living Standards In Many Decades… [Podcast]

A quick market update and a deep dive in the UK’s budget announcement, which was as political as it gets! The headline is households will go backwards, as unemployment rises, and a 2-year recession is likely. Worse, personal income tax bands are frozen, so the total tax take will be bigger than ever!

Investment allowances have been cut, and the future Government spending cuts have been pushed out beyond the next election.

The cost of debt to the Government rises.

This scenario is one we should expect to see playing out in other economies too. Living standards will drop.

Today’s post is brought to you by Ribbon Property Consultants.

Digital Finance Analytics (DFA) Blog

The Biggest Drop In Living Standards In Many Decades... [Podcast]

00:00 / 00:22:49

The Biggest Drop In Living Standards In Many Decades…

Investment allowances have been cut, and the future Government spending cuts have been pushed out beyond the next election.

The cost of debt to the Government rises.

This scenario is one we should expect to see playing out in other economies too. Living standards will drop.

Today’s post is brought to you by Ribbon Property Consultants.

If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.

Buying property, is both challenging and adversarial. The vendor has a professional on their side.

Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.

Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

UK Inflation Surprises On The Up Side…

The UK inflation data come in hot today, signalling broad-based inflation, including across services. Gas, electricity costs and food costs were among the main drivers, offset small falls in petrol and used cars.

This suggests the Bank of England will need to hike rates some more – though that may depend on the Chancellors Budget tomorrow.

Go to the Walk The World Universe at https://walktheworld.com.au/