Economic Monthly Review – September 2018
ContractorUK has provided the following brief overview of the economic landscape and a background into the current market. Sourced from Contractor Wealth.
Growth picks up but Brexit fears loom large
Although the UK economy recently recorded its fastest rate of growth in almost a year, Brexit-related uncertainties continue to cast a shadow over future growth prospects.
The latest data was significantly more positive than most economists had predicted and suggests the economy is on track for a solid third-quarter performance. However, while there may be few signs of an imminent Brexit-induced slump, most commentators still believe the economy could be set for a more stormy period as Brexit-related uncertainties act to constrain growth.
While the full ramifications of a no-deal Brexit are impossible to accurately predict, it is clear that such a scenario is likely to have severe negative consequences for the UK economy.
Retail sales rise strongly
The latest retail sales figures proved to be much stronger than analysts had been expecting as UK consumers continued their summer spending spree.
Commenting on the data, ONS senior statistician Rhian Murphy said: “Retail sales remained strong in the three months to August, with continued growth across all sectors. Food and household goods stores particularly benefited from the warm weather when compared with last summer.”
Economists are still warning that spending could slow across the rest of this year as a combination of relatively weak growth in real incomes and heightened political and Brexit-related uncertainty make consumers more cautious. However, the strong growth in sales witnessed over the summer months has certainly brought some much needed cheer to the beleaguered retail sector.
Inflation rises to six-month high
The rate of inflation in the UK unexpectedly jumped to a six-month high in August, confounding economists and policymakers who were widely expecting price pressures to ease.
ONS data showed that the Consumer Prices Index 12-month rate – which compares prices in the current month with the same period a year earlier – rose to 2.7% in August, up from 2.5% in July. This left this measure of inflation at its highest level since February 2018 and defied the consensus amongst economists that the rate would fall to 2.4%.
August’s increase was largely driven by rising prices for recreational goods, transport and clothing. Commenting on the figures, Mike Hardie, head of inflation at ONS, said: “Consumers paid more for theatre shows, sea fares and new season autumn clothing.”
Wage growth picks up over months
The latest set of employment statistics showed that the UK labour market remains in a particularly robust state and also revealed a recent pick-up in pay growth.
According to data from the Labour Force Survey the number of people unemployed stood at 1.36 million in the three months to July, 55,000 fewer than in the previous three-month period. This left the unemployment rate at 4.0%, its lowest level for over 40 years. And, while the number of people in work during the three months to July remained unchanged at 32.4 million, this still represents a historically high level.
Clearly, the good news for households in relation to wages was somewhat tempered by August’s inflation rise which suggests that the squeeze on real incomes may not be over. However, the data does still show that wages are currently rising more quickly than prices. And, while it will take a more significant acceleration in wage growth to close the gap in pay that has emerged over the last decade, the data is now painting a rosier picture on wage growth.
Editor’s Note: This economic overview has been sourced from Contractor Wealth – providers of Pensions, Savings and Investments for contractors.