Splashing the Cash
The economy is showing some of the right signs but uncertainty still prevails.
|Click to download as PDF|
Despite signs of a relatively strong and promising UK economy, consumer confidence has weakened. Their pessimism is not surprising given the ongoing financial instability in Europe, the stock market turmoil in China and perhaps even the implications of the Syrian refugee crisis on EU countries. With GDP growth at a healthy and stable level of 2.4 per cent for the year, it now means that output in the UK economy is 5.9 per cent higher than the pre-crisis peak of Q1 2008. Consequently, the UK has been the fastest growing economy in the G7 group of countries for the past 2 years.
Low inflation, rising average earnings, low unemployment and cheap money are all positive factors that should boost confidence and inspire consumers, so it’s puzzling that confidence is still falling for both consumers and businesses. The answer may lie in the belief that the economy isn’t in a ‘normal’ state and still faces challenges ahead with inflation below target and interest rates at a historical low. Perhaps it’s the knowledge of the uncertainty of what lies ahead that is affecting confidence.
Differing messages on interest rates could be contributing to this too. Andy Haldane, the Bank of England’s Chief Economist, has suggested that rather than a rise, we may need a cut in interest rates. This developed from his warning of a trilogy of events in emerging markets that could threaten the pace of recovery in the UK.
Another reason for low confidence could be the unequal dispersion of house price growth around the UK where only people in some areas, particularly London and the South, feel wealthier and as a result more confident. Perhaps we may all need to get used to the idea that we are experiencing a new normal?
|Click to enlarge.|
|< < Previous Page||Next Page > >|