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Could Rishi Sunak be right? Has the economy finally turned a corner? During a visit to a bus station in Harrogate yesterday, the Prime Minister admitted that while the last few years have undoubtedly been difficult, he believes Britain has turned a corner and is heading in the right direction.
The Prime Minister’s optimistic statements may seem strange in a week that will see a raft of gloomy economic news.
Tomorrow, the Office for National Statistics (ONS) will publish inflation figures for January, which are likely to show a small pick-up. On Thursday it releases GDP figures for the end of last year, which won’t make for pleasant reading.
Economists estimate that growth contracted 0.3 percent in December, suggesting the economy will have contracted 0.1 percent during the fourth quarter.
The drop in the final quarter of last year comes after a 0.1 percent drop in the third quarter – a technical recession.
All aboard: Prime Minister Rishi Sunak said he believed the UK had turned a corner during his visit to a bus station in Harrogate.
At best, the numbers will show the economy is stagnant, hit by a combination of strikes in the healthcare and railroad industries, as well as stormy weather that keeps more people at home. And it’s no surprise.
December retail sales already released showed a whopping 3.2 percent drop, the steepest drop since January 2021.
However, the Prime Minister may be right: the worst is over.
It is true that inflation will have risen slightly again in January after the surprise 4 percent increase in December. But the trajectory is definitely downward. Even Bank of England Governor Andrew Bailey agrees with that.
The environment is also better in the area of consumption. Wages are rising and the latest cut to National Insurance will hit households’ pockets.
In fact, retail sales data, due out on Friday, will show decent growth of 1.5 percent in January after December’s bombshell.
Recent business surveys also confirm that activity has recovered since the beginning of the year, a mood reflected in the number of corporate mergers and deals now being reported.
Private sector production has increased for three consecutive months and at a faster rate than expected. And it is in most of the country.
Leaving aside any geopolitical setbacks (or black swans), the first interest rate cut will come in May, followed by two more cuts before the fall. It was time too. Monetary policy is already too tight.
Sunak may be right to turn the corner, but it is too late to save his government from what is likely to be a bloodbath in the two by-elections on Thursday.
Which makes it even more essential that Jeremy Hunt presses ahead with serious tax cuts in next month’s Budget, which remains the most efficient way to lift morale and get the country’s charm back on track properly.
Fusion Monday
No wonder parking at my local train station, Audley End, on the Cambridge to Liverpool Street line, has almost returned to pre-pandemic levels.
The many bankers and lawyers living in the district are finally escaping their garden offices and rushing to the City to work on the plethora of deals that are emerging. There’s nothing like high rates to get city folks moving.
Private equity is buzzing around Liverpool-based Very Group. It is part of the dismantling of the Barclay brothers’ empire and they are said to want more than £4 billion. That seems pretty expensive considering the debt levels.
And perhaps there will be a new contender for the FTSE 100 if Tritax Big Box and UK Commercial Property go ahead with their merger, creating the UK’s fourth-largest real estate investment trust.
Another sign that people are on the move again is Upper Crust owner SSP Group’s attack on an Australia-based airport food retailer.
SSP operates 2,800 food and retail establishments in 180 airports and 300 train stations and wants to expand further in Asia. That’s a pretty accurate indicator of what’s happening on the ground and in the air.
in your everything
Tod’s has hit a rough patch recently, perhaps because it needs a mortgage to buy its admittedly beautiful loafers.
The majority family company has decided that leaving the Milan Stock Exchange is the best option.
Like the London Stock Exchange, Milan has recently seen several listings as companies go private or relocate.
Once again, Bernard Arnault’s LVMH triumphs. He has a stake and his investment arm is financing the deal. It must be a shoe at hand to take control.